Bankruptcy court clears $1 billion sale of Genesis Health operating business

U.S. Bankruptcy Judge Stacey Jernigan on Jan. 20 approved the sale of Genesis Health’s operating business — a portfolio of 175 skilled nursing and assisted-living facilities — to a NewGen-backed bidder that participated in the Jan. 13 auction as 101 West State Street for roughly $1 billion, with some filings reporting $996 million. The decision ends a contentious sale process that previously rejected an insider-led rescue and sets the stage for operational and regulatory transitions across 17 to 18 states serving about 15,000 residents.

Court documents and testimony described the winning buyer as an entity backed by California-based NewGen Health. NewGen’s chief financial officer Shawn Zhou testified that Genesis insiders, including controlling shareholder Joel Landau and his private-equity firm ReGen Healthcare, were not involved in NewGen’s acquisition. The judge also noted the second auction appeared to have been conducted at arm’s length and preserved plaintiffs’ rights to pursue claims against company insiders.

The approval follows a restarted sale process that had been prompted by Jernigan’s earlier rejection of an insider plan that would have transferred control of the operating business to Genesis-affiliated parties while using Chapter 11 to pare liabilities and litigation exposure. The court had accepted a new procedure that allowed competitive bidding, with Genie 3 Partners LLC authorized on Jan. 7 to lead a revamped sale under protections that included a $10 million break-up fee and up to $1 million for expenses. Genie 3’s proposal was reported in court papers as a near $1 billion bid structured with $259 million in cash, a $100 million unsecured promissory note payable over four years at 3 percent, and an assumption of multiple liabilities including capped amounts for payroll, employee time off and certain secured claims.

Genesis entered Chapter 11 on July 9, 2025, carrying more than $2.3 billion in liabilities. Filings break that debt roughly into $709 million secured and about $1.6 billion unsecured. At the time of the filing Genesis quantified plaintiff liabilities at $259 million, while adversaries and counsel maintain actual malpractice and wrongful-death exposures could be substantially higher. The company traced its collapse to heavy leverage from past buyouts, difficulty retaining nursing staff, rising labor and operating costs, and corporate strain after rapid expansion. Related corporate moves included a 2011 transfer of most real estate to a real-estate investment trust and leaseback arrangements that raised capital but increased ongoing lease expenses.

Practically, the approved sale aims to deliver greater recoveries for creditors while enabling the complex, licensed transfers needed to keep facilities running. Fiduciaries urged that an agreed sale would better secure continuity of care and regulatory compliance than the earlier insider plan. One analysis presented in court materials estimated the 101 West deal would boost recoveries to roughly 30 cents on the dollar for creditors, compared with an estimated 17 cents under the earlier proposed outcome.

Market implications extend beyond Genesis. The case highlights investor appetite for distressed care assets even as the sector grapples with staffing shortages, higher wages, litigation risk and tighter regulatory scrutiny. The approval clears the way to finalize an asset purchase agreement and begin regulatory filings and operational transfers; Jernigan’s ruling makes clear that the sale will not extinguish claims against insiders, leaving plaintiffs to pursue separate remedies even after ownership changes.