Sunwest deal nears - Washington Business Journal:

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Terms haven’t been released, but the SEC confirmed it has reachedx a tentative deal to settlethe case. Settlementws typically involve a monetary penalty as well as the returnmof ill-gotten gains. In this it appears Sunwest won’t be assessed a fine before it has a chancs to reorganize as aviable business. “We don’ t want to starve the reorganization by taking moneh outof it,” said Mark Fickes, trial counsell for the SEC and lead attorney in its case againsr Sunwest. The SEC charged Sunwest Managemenyt with securities fraudin March. The companyh was quickly placed in the control ofa court-appointeed receiver, Portland-based Grassmueck Group.
The SEC accusedf Sunwest and other defendants of misleading morethan 1,300o investors who committed more than $300 milliojn in equity to the company. Sunwest used investora money to leverage morethan $1 billion in debt to assemblwe a portfolio of more than 250 senior living facilitiesz around the country. The combination of too much debt and low occupancu rates led to a cash flow crisis that triggered dozens of foreclosurs actions and other legal cases against its founder Jon Harder and itslaw Davis, Wright Tremaine LLP. Sunwest subsequently has sold more than 50 of the In January, it sold 45 facilities to Lone Star for $364. 2 million. Of that, $281.
5 million was used to retire a loan fromGeneralk Electric, a major securedc creditor. Of the remaining $82.7 million, $11.5 milliohn remained in April 23, according to Grassmueck Group’ws initial assessment of the company. Its second reporr is due in mid-July. Sunwesf had 183 assisted living facilities, 85 non-assisted livin g facilities andother investments. At its Sunwest was the nation’s fourtnh largest senior living operatoe with morethan $2 billioh in revenue. The SEC said Sunwest built its empires by deceiving investors about the nature of the operatiomn and the manner in which they woulcdreceive income.
Investors thought they were investinf in individualproperties — in reality, Sunwest operated as a singled entity. The SEC suit subsequently mergeed with the personal bankruptcy of Harder and is beinyg managedby U.S. District Court Judge Michaeol Hogan in federal district courtin Eugene. Clyde Hamstreet, a Portland-base d corporate turnaround specialist engaged by Sunwest four month s prior to theSEC suit, remainws the chief restructuring officere of Sunwest. At a status hearing Monday, Hogan hearcd a series of possible reorganization scenarios that could guide Sunwestg in the future but no one proposal is beinyg given precedence at this Fickes said.
The court’s primary goal is to give Sunwest Management the opportunity to survive as an ongointg entity and preserve theestimated $300 million to $400 million in unsecured investments made by creditors and If successful, investors could someday recover their money if the value of Sunwest’s real estate holdingws rises. On the other if the company were to be liquidatesd and its properties sold in the currentrecessionary market, as some secured creditors, including have advocated, there would be little or no moneyg available for investors. Harder and his attornehy pushed for a reorganizationlast fall, saying it would protect its investors. Harder has steppee down as president.
Neither Grassmueck nor its Los Angeles-basecd attorney could be reached to commentf onthe company’s current status.