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Central Illinois nursing home company faces foreclosure on 17 properties

Fondulac Rehabilitiation and Health Care Center is located off Illini Drive in East Peoria.
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Fondulac Rehabilitiation and Health Care Center is located off Illini Drive in East Peoria.

Seventeen facilities owned by a Peoria-based nursing home and assisted living company are now in foreclosure proceedings after lenders allege a combined $51 million in debts went unpaid.

Petersen Health Care entered foreclosure proceedings with X-Caliber Funding and Capital Funding in two separate federal court cases last month. The story was first reported by the Peoria Journal Star.

A complaint filed Jan. 23 in the Illinois Northern District Court by X-Caliber Funding said Petersen Health Care defaulted on loans on Dec. 29, 2023. They're demanding a little more than $31.2 million.

Attorney Michael Flanagan is the court-appointed receiver managing the eight Petersen facilities in X-Caliber's case.

In a statement, Petersen Health Care said the lender "took a very aggressive action and placed facilities in El Paso, Flanagan, Kewanee, Knoxville, Monmouth, Galesburg, and Polo into receivership." They said X-Caliber's management company, Tutera Group, then visited the sites without their prior knowledge to assess and manage care.

But X-Caliber's attorneys told a different story in court documents they filed Jan. 23 in the Rockford division of the U.S. District Court of Northern Illinois. They said Petersen Health Care had claimed they suffered a ransomware attack in fall 2023 that took down their billing systems at several facilities and ultimately "crippled" the company's finances. X-Caliber said they didn't find out about that alleged attack until December.

"Upon Plaintiff’s review of Defendants’ books and records since that time, it became apparent that Defendants were actually diverting cash from their facilities to float operations at other facilities under common ownership and claiming an inability to pay the current expenses of the facilities," the attorneys wrote.

The company claimed Petersen's lack of liquidity and use of money transfers to pay off other debts were putting resident health and safety at risk. U.S. District Court Judge Iain D. Johnson appointed Flanagan receiver two days later.

Petersen Health Care says they still own those properties, and are working with the lender's management company to minimize the impact to staff and residents.

In the second complaint filed Jan. 31 in the Eastern Division of the U.S. District Court of Northern Illinois, Capital Funding alleges Petersen Health Care failed to pay up on more than $19 million in loans insured by the U.S. Department of Housing and Urban Development on Jan. 24.

Capital Funding has also requested a court-appointed receiver for the nine facilities listed in their compaint. Those include Timbercreek Rehab and Health Care in Pekin, Fondulac Fondulac Rehabilitiation and Health Care Center in East Peoria, and Sunset Rehabilitation and Health Care Center in Canton.

The lender said they also didn't know about the alleged fall 2023 ransomware attack until December. A Jan. 31 filing said Petersen Health Care lost its insurance in December after failing to make payments and hasn't been able to secure a replacement.

Petersen Health Care reportedly told Capital Funding that they plan to file for bankruptcy, but can't because they don't have insurance and can't find a new insurer. That's per Capital Funding's request for a court-appointed receiver.

U.S. District Court Judge Thomas Durkin is set to consider the motion for a receiver at a hearing on Feb. 7 in Chicago.

A spokesperson for Petersen Health Care didn't respond to a question about whether the company plans to file for bankruptcy, but their overall financial state was addressed in a a portion of a prepared statement.

"Inadequate state and federal funding and staffing issues continue to put pressure on healthcare providers and were significant factors leading to the current situation. We are working actively with our lenders and aim to find a solution to return these facilities to our management," the company stated.

Tim is the News Director at WCBU Peoria Public Radio.
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