A senior living company with 15 communities in seven states is moving forward with a Chapter 11 bankruptcy plan that would inject it with needed cash and reduce some of its debt in the process.

American Eagle Delaware Holding Company and its subsidiary Eagle Senior Living obtained confirmation from the US Bankruptcy Court this week for the District of Delaware to proceed with a debt restructuring plan and thus gain financial flexibility.

The plan includes the sale of two seniors’ residences, interest rate reductions for Eagle’s bond debt and debt reduction of approximately $40 million, and $28 million in new funds from the exchange of 2018 bonds with new 2022 bonds, according to David Gordon, shareholder of Polsinelli, the law firm representing the company in the bankruptcy proceedings.

American Eagle “is going to come out of Chapter 11 a better, stronger company with a better balance sheet,” he told Senior Housing News.

The $28 million loan funds all of the company’s capital expenditures over the next four years, Gordon added.

Eagle Senior Living, based in Ann Arbor, Mich., purchased a portfolio of 16 senior living communities from Brookdale Senior Living (NYSE: BDK) in late 2018. But in 2020, the company encountered unforeseen challenges related to Covid-19. pandemic, which caused a drop in the occupancy rate and ultimately led the company to default on the terms of its bonds.

“Debtors continue to struggle with labor shortages and employee retention issues due to, among other things, increased Covid-19 positivity rates among their current employees, vaccination mandates and competition from other industries for debtors’ labor,” reads a court document filed in March in the company’s bankruptcy proceedings.

As of December 31, 2021, the occupancy rate of the company’s portfolio of nearly 1,200 units was 81.4%.

All that’s left to close the Chapter 11 restructuring is to reissue the bonds, which will be done in June when Eagle closes the sale of its Vista Lake community in Florida, which was put up for auction as part of the bankruptcy. The company also sold another underperforming community in Florida through the bankruptcy auction.

Illuminate Healthcare was the successful bidder for the community. The sale should be finalized in the coming months.