published Saturday, December 18th, 2010

Seniors' home aims to settle dispute


by Emily Bregel

After filing bankruptcy in October to avoid foreclosure, the company that owns Summit View Senior Community is trying to settle a disputed debt with a lender.

Leaders of the Runyan Drive facility, which offers independent and assisted living, are requesting an $8 million bond issue from Chattanooga's Health, Educational and Housing Facilities Board of the City of Chattanooga. The board will meet Monday to consider the request, which would allow the senior living home to refinance its debt.

The company that owns the senior home, Senior Housing Alternatives, hopes to use the funding to settle litigation with lender Bernard Global Loan investors, based in the Cayman Islands.

"We're optimistic that we'll be able to work together to work out a settlement," said Melanie Adair, president of the board of Senior Housing Alternatives.

The Bankruptcy Court for East Tennessee is evaluating the validity of Bernard Global's debt claim, which Senior Housing Alternatives maintains is based on fraudulent charges.

If the company can't settle the case, the Summit View property could face foreclosure, meaning about 140 elderly residents would have to move.

Adair said she is confident that won't happen: Even if litigation goes forward, Adair and her attorneys believe they have enough evidence to prove that the lender's debt claim is based on fraud and therefore unenforceable, she said.

"There is serious fraud in the situation. We haven't been interested in being heavily involved in litigation from the very beginning. We've just been trying to get things right," she said.

A hearing is set for January, but a decision may not be finalized at that time, said Jerrold Farinash, bankruptcy attorney for Senior Housing Alternatives. The final decision may come from a federal court in Georgia, where a case between the lender and Senior Housing Alternatives has been stayed by the bankruptcy proceedings, he said.

"The whole bankruptcy case basically revolves around what, if anything, they owe with the lender," Farinash said.

SEEKING TO SETTLE

Bernard Global is trying to collect more than $6 million it says it is owed.

Adair and her attorneys maintain that the company was not in default on its loan and that foreclosure was based on enforcement of charges made fraudulently by its lenders.

In a Hamilton County Chancery Court case earlier this year, Summit View said its original lender, the now-bankrupt Cornerstone Ministries Investments of Cumming, Ga., imposed $2.4 million in fraudulent charges. Summit View argued that Bernard Global, which acquired the loan, knew of the fraud and still tried to collect on those charges.

Attorneys for Bernard Global did not return calls seeking comment.

In February, a Chancery Court judge granted a temporary injunction to stop the planned public auction of the facility while a federal court in Georgia worked to determine the true amount owed.

But after that injunction ended, the facility had to file bankruptcy to stay the case and avoid foreclosure, Farinash said.

"They've got an awful lot of supporters," Farinash said of the senior living facility. "They have one of the highest occupancy rates of any facility. They have an approach to caring for people that's different from anyone else. They try to engage the people in their treatments."

The Chattanooga Health, Educational and Housing Facilities Board is a public corporation set up as a vehicle for bondholders to issue funds for housing and educational facilities, often at a lower interest rate, said Phil Noblett, deputy city attorney.

Many nonprofits in Chattanooga are trying to lock in year-end, low interest rates by refinancing, he said.

"We've had a number of those folks coming before the Health, Education and Housing Facilities Board, trying to do that this year," he said.

Contact staff writer Emily Bregel at ebregel@timesfree press.com or 423-757-6467.

about Emily Bregel...

Health care reporter Emily Bregel has worked at the Chattanooga Times Free Press since July 2006. She previously covered banking and wrote for the Life section. Emily, a native of Baltimore, Md., earned a bachelor’s degree in American Studies from Columbia University. She received a first-place award for feature writing from the East Tennessee Society of Professional Journalists’ Golden Press Card Contest for a 2009 article about a boy with a congenital heart defect. She ...

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