Nonprofit KidsPeace Corp. Files For Chapter 11, Citing $100M In Pension Plan Debt

by Tara Arick on May 24, 2013 · 0 comments

in Bankruptcy

- From LexisNexis® Mealey’s™ Daily Legal News.

KidsPeace Corp., a nonprofit that operates a 96-bed psychiatric hospital and provides what it calls “acute behavioral healthcare” to children and young adults, among other services, on May 22 filed for Chapter 11 bankruptcy, citing debt of $ 100 million related to its pension plan alone (In Re: KidsPeace, No. 13-14509, E.D. Pa. Bkcy.).

KidsPeace filed for Chapter 11 in the U.S. Bankruptcy Court for the Eastern District of Pennsylvania.

Assets, Liabilities

According to the bankruptcy petition, for the three-month period ending March 31, 2013, KidsPeace’s revenues on a consolidated basis were $ 30,699,949 and its expenses for the same period were $ 30,931,804.

The corporation’s total assets in 2012 were $ 86,666,989, while its total liabilities that same year were $ 158,587,999. KidsPeace owes $ 56,206,821 in bond debt and carries a pension liability of $ 100 million.

The corporation’s primary secured debts are:

* A loan from Gemino Healthcare Finance for a $ 7.5 million line of credit.

* Revenue bonds issued by the Lehigh County General Purpose Authority valued at $ 74,985,000.

* Bonds issued by the U.S. Department of Agriculture (USDA) valued at $ 3.6 million.

* A mortgage with National Penn Bank, secured against the corporation’s national headquarters building in Schnecksville, Pa., at a fixed rate of interest of 6.7 percent due in monthly installments of principal and interest of $ 16,308 through May 2014, with a final payment of $ 1,088,428 in June 2014.

* Letters of credit with M&T Bank totaling $ 1,853,722.

Pension Plan

The pension plan debt pertains to the KidsPeace Defined Benefit Pension Plan (KDBPP), which KidsPeace says it formerly sponsored. The KDBPP is a pension benefit plan guaranteed by the Pension Benefit Guarantee Corp. (PBGC).

KidsPeace has not made any contributions to the pension plan since September 2011, and benefits under the pension plan were frozen as of Jan. 1, 2009, the corporation says. The PBGC alleges that the pension plan is underfunded by $ 100 million, according to the petition. Moreover, KidsPeace did not make its annual pension plan contribution of $ 3 million in the fiscal year ending on Dec. 31, 2011.

In addition running to its hospital, the corporation bills itself as a provider of “a comprehensive range of residential treatment programs, regular and special education services, and a variety of foster care and community-based treatment programs to help children, adolescents and young adults overcome challenges and transform their lives.”

KidsPeace operates through six subsidiary nonprofit Pennsylvania member corporations and one subsidiary nonprofit New York corporation and employs 1,951 full- and part-time employees, including approximately 143 licensed nurses, eight physicians and 50 specialized teachers. The corporation operates in Pennsylvania, Georgia, Maine and New York.

KidsPeace is represented by Morris Bauer of Norris McLaughlin & Marcus in Allentown, Pa.

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