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Centennial Health Care
Turning a distressed operation into a profit windfall

Atlanta-based Centennial Health Care was a large company that owned or leased 66 nursing homes in 19 mid-Atlantic, mid-western and southern states. With Centennial in bankruptcy, management moved quickly to align itself with a competing operator in an attempt to purchase the company. The SCD team, along with its 50/50 partners at Formation Capital, LLC, saw a golden opportunity. After conversations with Centennial’s unsecured creditors and a prompt and thorough due diligence review of Centennial operations and assets, they made a superior offer and prevailed upon the bankruptcy court to force an auction of the company. At the contentious February 2004 auction, the combined Falcon/Formation team topped the management consortium's best offer and won the bidding. The transaction closed within six short months, and the Centennial purchase was secured.

With news of the auction spreading quickly throughout the industry, the SCD and Formation team was able to approach former managers of Centennial and, with emergence from bankruptcy now certain, encouraged them to form a new company that would lease back all 66 nursing homes from the holding company created to purchase Centennial, FCSCD Holdings, LLC. The holding company separated the real estate into 66 separate special purpose entities and master-leased the operations to the former Centennial management team. The new operators were soon able to increase occupancy of the company’s 6,377 beds, while rapidly improving operations, patient care, quality mix, and the morale of its more than 6,500 employees.

The financial reward for this hard-fought strategic victory came to FCSCD Holdings, LLC in 2006, when the repositioned and resurrected nursing home company’s real estate-purchased at auction for just $135 million—was sold for more than $360 million.

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