Case bjh11 Doc 341 Filed 01/11/19 Entered 01/11/19 16:55:23 Page 1 of 7

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1 Case bjh11 Doc 341 Filed 01/11/19 Entered 01/11/19 16:55:23 Page 1 of 7 RUTH A. HARVEY Director MARGARET M. NEWELL Assistant Director Leah V. Lerman Kevin P. VanLandingham Trial Attorneys P.O. Box 875 Ben Franklin Station Washington, DC leah.v.lerman@usdoj.gov Telephone: Facsimile: Attorneys for United States of America IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION In re: Chapter 11 SENIOR CARE CENTERS, LLC, et al., 1 Case No (BJH) Debtors. (Jointly Administered) Ref: Dk. 24 THE UNITED STATES OF AMERICA S MOTION TO CONTINUE FINAL HEARING ON CASH MANAGEMENT AND CASH COLLATERAL USE Comes now the United States of America, on behalf of its Department of Housing and Urban Development 2 ( HUD ), and respectfully files this motion (the Motion ) to continue the final hearings on the Debtors Motion for Interim and Final Orders (I) Authorizing Continued Use of Existing Cash Management Systems, Including Maintenance 1 A list of the Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, is attached hereto as Exhibit A. The Debtors mailing address is 600 North Pearl Street, Suite 1100, Dallas, Texas The United States of America previously obtained reservation of rights language on behalf of its Department of Health and Human Services, which undersigned counsel understands shall remain in the final cash collateral order.

2 Case bjh11 Doc 341 Filed 01/11/19 Entered 01/11/19 16:55:23 Page 2 of 7 of Existing Bank Accounts, Checks and Business Forms, and (II) Authorizing Continuation of Existing Deposit Practices (the Cash Management Motion, Dkt. 9) and the Motion for Entry of Interim and Final Orders (I) Authorizing the Use of Cash Collateral, (II) Granting Adequate Protection, (III) Modifying The Automatic Stay, (IV) Setting a Final Hearing, and (V) Granting Related Relief (the Cash Collateral Motion, Dkt. 24). In support of its Motion, the United States asserts as follows: BACKGROUND 1. On December 4, 2018 (the Petition Date ), the above-captioned debtors (the Debtors ) filed their voluntary petitions for relief under chapter 11 of Title 11 of the United States Code (the Bankruptcy Code ). See Petition, Dkt On December 7, 2017, the Court granted the Debtors request to have these cases jointly administered. Order, Dkt On December 19, 2018, the United States of America filed a limited objection (the Limited Objection ) to the Cash Collateral Motion. 4. Prior to December 19, 2018, the United States of America had obtained reservation of rights language for the order granting the Cash Management Motion. Based on the information available to her at the time, counsel for the United States of America understood that such reservation of rights language was sufficient Final hearings on the Cash Management Motion and the Cash Collateral Motion were set for January 14, The United States of America also obtained reservation of rights language on behalf of the Department of Health and Human Services and its Centers for Medicare & Medicaid Services in the order granting the Cash Collateral Motion on an interim basis.

3 Case bjh11 Doc 341 Filed 01/11/19 Entered 01/11/19 16:55:23 Page 3 of 7 6. On December 21, 2018, at midnight, appropriations lapsed and certain departments of the United States of America shut down and have not been operating in the normal course. 7. Specifically, HUD has been shut down (with minor exceptions not applicable to this case) since December 21, Undersigned counsel has not been able to obtain HUD review, comment or input relating to these bankruptcy cases. 8. Thirty-two Debtors (collectively, the HUD Debtors ), are operators of skilled nursing facility projects built and financed pursuant to HUD programs and insured by HUD (the HUD Projects, each a HUD Project ). See Exhibit B to the United States Limited Objection; see also First Day Pleadings, O Halloran Decl. at 32, Dkt. 25. As described in Exhibit B, each HUD Project was financed by one of five 4 lenders: Lancaster Pollard Mortgage Company; KeyBank, NA; Berkadia Commercial Mortgage, LLC, Red Capital Mortgage and Love Funding Corporation (collectively, the HUD Insured Lenders ). The HUD Insured Lenders currently hold perfected security interests in the HUD Debtors cash, accounts receivable and the proceeds thereof, although the Debtors assert that the liens are subject to dispute. 9. HUD has a regulatory interest in the HUD Projects pursuant to numerous regulatory agreements entered into by the HUD Debtors, by various Debtor and nondebtor master tenants, and by the thirty-two entities that own the HUD Projects, as described on Exhibit B to the Limited Objection (collectively, the Owners 5 ). These regulatory agreements (the Regulatory Agreements, each a Regulatory Agreement ) 4 Although the United States incorrectly listed only four lenders in its Limited Objection, it learned later that a fifth lender and two more HUD Projects are involved in these cases. 5 The Owners are also known as the Borrowers in the HUD Regulatory Agreements.

4 Case bjh11 Doc 341 Filed 01/11/19 Entered 01/11/19 16:55:23 Page 4 of 7 were signed by the HUD Debtors and Owners and properly recorded in the appropriate counties. Examples of a HUD Debtor Regulatory Agreement and an Owner Regulatory Agreement are attached to the Limited Objection as Exhibits C and D. 10. These Regulatory Agreements set forth numerous obligations the Owners and HUD Debtors owe HUD, including, without limitation, the appropriate use of project funds. The HUD Debtors are further obligated to HUD and the HUD Insured Lenders pursuant to various HUD Insured Lender loan documents, including, without limitation, security agreements and deeds of trust The Debtors and non-debtor affiliates are also subject to HUD statutes, regulations, rules, policies and procedures. 12. On January 9, 2019, the United States learned that in or about 2015 the Debtors modified their banking and deposit practices in a way that may violate HUD law and certain HUD Insured Lender loan documents. 13. Counsel for the United States of America requested from the Debtors that the January 14 hearing on the Cash Management Motion and the Cash Collateral Motion be interim hearings, and that the final hearing on both motions be continued. 14. Debtors counsel indicated to undersigned counsel that the hearing on the Cash Collateral Motion and the Cash Management Motion would be additional interim hearings, but because the Debtors agenda indicates that the hearing on the Cash Management Motion may be a third interim or a final, undersigned counsel files this Motion to continue the final hearing as a precaution. 6 Prior to the shutdown, HUD continued to review the numerous loan documents associated with the HUD Debtors and the HUD Projects and will continue to do so upon the shutdown ending, and so reserves the right to modify or amend this motion or the Limited Objection or otherwise raise additional issues as necessary.

5 Case bjh11 Doc 341 Filed 01/11/19 Entered 01/11/19 16:55:23 Page 5 of 7 RELIEF REQUESTED 15. The hearings on the Cash Collateral Motion and Cash Management Motion should go forward on January 14, 2019 as interim hearings, with additional interim orders entered. The final hearings on these motions should be continued, preferably to February 21, HUD, and possibly other federal agencies will be greatly prejudiced if these motions are granted on a final basis, as HUD has not had an opportunity to participate in these bankruptcy cases since December 21, HUD has multiple interests at stake in these cases and should have a fair and adequate opportunity to protect those interests. No other party will be prejudiced if the final hearings are continued to a later date. CONCLUSION 17. For the foregoing reasons, the final hearings on the Cash Collateral Motion and the Cash Management Motion should not go forward on January 14, 2019 on a final basis, and final hearings on these motions should be.continued to a date at least ten business days after the federal government shutdown ends to allow HUD and other federal agencies an opportunity to participate in these cases and adequately protect their interests. DATED January 11, 2019 Respectfully submitted, JOSEPH H. HUNT Assistant Attorney General ERIN NEALY COX United States Attorney DONNA WEBB Assistant United States Attorney

6 Case bjh11 Doc 341 Filed 01/11/19 Entered 01/11/19 16:55:23 Page 6 of 7 /s/ Leah V. Lerman_ RUTH A. HARVEY Director MARGARET M. NEWELL Assistant Director LEAH V. LERMAN KEVIN P. VANLANDINGHAM Trial Attorneys Civil Division U. S. Department of Justice P. O. Box 875 Washington, D.C T (202) F (202) ATTORNEYS FOR THE UNITED STATES

7 Case bjh11 Doc 341 Filed 01/11/19 Entered 01/11/19 16:55:23 Page 7 of 7 Certificate of Service On January 11, 2019, I electronically submitted the foregoing document with the clerk of court for the U.S. Bankruptcy Court, Northern District of Texas, using the electronic case filing system of the court. I hereby certify that I have served all parties electronically or by another manner authorized by Federal Rule of Civil Procedure 5(b)(2). /s/ Leah V. Lerman Leah V. Lerman Trial Attorney

8 Case bjh11 Doc Filed 01/11/19 Entered 01/11/19 16:55:23 Page 1 of 4 EXHIBIT A

9 Case bjh11 Doc Doc Filed 12/07/18 01/11/19 Entered 12/07/18 01/11/1911:21:05 16:55:23 Page 7 2 of of 9 4 Exhibit A (Sorted Alphabetically) # Debtor Name Case No. EIN 1. Alief SCC LLC Bandera SCC LLC Baytown SCC LLC Beltline SCC LLC Booker SCC LLC Bossier SCC LLC Bradford SCC LLC Brinker SCC LLC Brownwood SCC LLC Capitol SCC LLC CapWest-Texas LLC Cedar Bayou SCC LLC Clear Brook SCC LLC Colonial SCC LLC Community SCC LLC Corpus Christi SCC LLC Crestwood SCC LLC Crowley SCC LLC CTLTC Real Estate, LLC Fairpark SCC LLC Gamble Hospice Care Central LLC Gamble Hospice Care Northeast LLC Gamble Hospice Care Northwest LLC Gamble Hospice Care of Cenla LLC Green Oaks SCC LLC Harbor Lakes SCC LLC Harden HUD Holdco LLC Harden Non-HUD Holdco LLC Harden Pharmacy LLC Hearthstone SCC LLC Hewitt SCC LLC HG SCC LLC Hill Country SCC LLC Holland SCC LLC Hunters Pond SCC LLC Jacksonville SCC LLC La Hacienda SCC LLC Lakepointe SCC LLC Major Timbers LLC Marlandwood East SCC LLC Marlandwood West SCC LLC Meadow Creek SCC LLC Midland SCC LLC Mill Forest Road SCC LLC Mission SCC LLC Mullican SCC LLC Mystic Park SCC LLC Normandie SCC LLC

10 Case bjh11 Doc Doc Filed 12/07/18 01/11/19 Entered 12/07/18 01/11/1911:21:05 16:55:23 Page 8 3 of of 9 4 # Debtor Name Case No. EIN 49. Onion Creek SCC LLC Park Bend SCC LLC Pasadena SCC LLC Pecan Tree SCC LLC Pecan Valley SCC LLC Pleasantmanor SCC LLC PM Management - Allen NC LLC PM Management - Babcock NC LLC PM Management - Cedar Park NC LLC PM Management - Corpus Christi NC II LLC PM Management - Corpus Christi NC III LLC PM Management - Corsicana NC II LLC PM Management - Corsicana NC III LLC PM Management - Corsicana NC LLC PM Management - Denison NC LLC PM Management - El Paso I NC LLC PM Management - Fredericksburg NC LLC PM Management - Frisco NC LLC PM Management - Garland NC LLC PM Management - Golden Triangle NC I LLC PM Management - Golden Triangle NC II LLC PM Management - Golden Triangle NC III LLC PM Management - Golden Triangle NC IV LLC PM Management - Killeen I NC LLC PM Management - Killeen II NC LLC PM Management - Killeen III NC LLC PM Management - Lewisville NC LLC PM Management - New Braunfels NC LLC PM Management - Park Valley NC LLC PM Management - Pflugerville AL LLC PM Management - Portland AL LLC PM Management - Portland NC LLC PM Management - Round Rock AL LLC PM Management - San Antonio NC LLC Presidential SCC LLC Redoak SCC LLC Riverside SCC LLC Round Rock SCC LLC Rowlett SCC LLC Ruston SCC LLC RW SCC LLC Sagebrook SCC LLC San Angelo SCC LLC SCC Edinburg LLC SCC Hospice Holdco LLC SCC Senior Care Investments LLC SCC Socorro LLC Senior Care Center Management II LLC Senior Care Center Management LLC Senior Care Centers Home Health, LLC Senior Care Centers LLC Senior Rehab Solutions LLC

11 Case bjh11 Doc Doc Filed 12/07/18 01/11/19 Entered 12/07/18 01/11/1911:21:05 16:55:23 Page 9 4 of of 9 4 # Debtor Name Case No. EIN 101. Senior Rehab Solutions North Louisiana LLC Shreveport SCC LLC Solutions 2 Wellness LLC South Oaks SCC LLC Springlake ALF SCC LLC Springlake SCC LLC Stallings Court SCC LLC Stonebridge SCC LLC Stonegate SCC LLC Summer Regency SCC LLC TRISUN Healthcare LLC Valley Grande SCC LLC Vintage SCC LLC West Oaks SCC LLC Western Hills SCC LLC Weston Inn SCC LLC Westover Hills SCC LLC Whitesboro SCC LLC Windcrest SCC LLC Windmill SCC LLC Wurzbach SCC LLC