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Sunwest files for Chapter 11 process

Sunwest Management Inc. investors and creditors may yet see a good portion of the $2 billion they poured into the Salem-based senior housing company.

A 400-page reorganization plan was filed at U.S. District Court in Eugene Tuesday, proposing a brief Chapter 11 process to modify loan terms and issue securities. The plan needs both court and creditor approval.

"What we were looking for was the most equitable way to treat all investors," said Tom Decker, a spokesman for court-appointed receiver and chief restructuring officer Clyde Hamstreet of Hamstreet & Associates on Wednesday.

The plan calls for the sale of approximately 60 senior residences, including two in Grants Pass — Spring Meadow Cottages on Shady Lane and Spring Meadow Retirement Community on Redwood Circle. Middlefield Oaks Senior Living Community in Cottage Grove, a project financed by Medford-based PremierWest Bank, also is on the list.

At its height, Sunwest managed or owned 280 senior living centers with 10,000 residents.

After the proposed sale, Decker said the company would retain just over 150 properties, 32 of them in Oregon, including Eagle Cove Retirement and Assisted Living in Eagle Point.

About 1,200 investors put down more than $300 million to finance the company's rapid growth. Along with that money, Sunwest borrowed millions more in becoming the nation's fourth-largest assisted living operator.

If the reorganization is approved, investors might receive repayment within seven years, possibly from a public offering.

A hearing is set in September and Decker anticipates a decision soon after.

"The goal and expectation is for investors to get back as much as they invested and perhaps increased value," Decker said.

Hundreds of small investors put retirement savings into specific Sunwest properties, anticipating regular rent payments in return.

Instead, according to Securities and Exchange Commission documents, Sunwest operated the company as a single entity.

When the real estate market crashed, the company was no longer able to refinance its properties. Lenders quickly lined up and founder Jon Harder filed for personal bankruptcy last December.

Harder and former executives Darryl Fisher and Wally Gutzler could retain up to 25 percent ownership in the troubled company and could profit from an initial public offering if a plan filed late Tuesday in Oregon's U.S. District Court wins approval.

Reach reporter Greg Stiles at 776-4463 or e-mail business@mailtribune.com.