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Handling the Non-Profit Workout/Bankruptcy

By Paul J. Ricotta and Leonard Weiser-Varon
August 30, 2005

Last month, we discussed how to handle the non-profit workout/bankruptcy with an analysis of one of the largest not-for-profit bankruptcy cases even filed — In re: the National Benevolent Association of the Christian Church (Disciples of Christ) et al., (Bankr. W.D. Texas), Case No. 04-50948 (RBK). As we explained, the National Benevolent Association of the Christian Church (Disciples of Christ) (NBA) was founded in 1887 as a Missouri-based nonprofit corporation. Its mission was to provide services to disadvantaged families and others. Prior to bankruptcy, the NBA was the parent company of approximately 25 affiliated nonprofit entities that owned and operated 11 senior care facilities, four children's care centers, and three special care facilities in 12 states, among other things. We presented a great deal of analytical background on the nonprofit corporation and its path toward bankruptcy. This month, we discuss the bankruptcy case itself.

The Bankruptcy Case

Along with the usual first-day motions, the NBA sought to enter into a secured, super-priority DIP loan and to change significantly its business model at its senior care facilities. Because no Creditors' Committee had yet been appointed, and because UMB and the bondholders had specific and unique familiarity with the Debtors' business, finances, and existing business model, UMB and the bondholders vigorously undertook to oppose the Debtors' requests.

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