2 Care Enterprises Executives Quit in Reorganization : Chapter 11 Plan Offers Stock to Creditors of Tustin Chain

The top two executives of Care Enterprises have resigned as part of a reorganization plan intended to lift the Tustin-based nursing-home chain out of bankruptcy, attorneys said Friday.

Twin brothers Dee Roy and Lee Roy Bangerter Thursday went on paid leaves of absence that will last 60 days or until the court confirms the proposed reorganization plan, said David Kupetz, an attorney representing the company.

After that the plan calls for the brothers to be retained as consultants, and each would receive a salary of $250,000 a year, which is higher than their current annual salary of $211,000.

Lee Roy Bangerter was chairman and chief executive officer of the chain, while Dee Roy was chief financial officer. The brothers are also Care Enterprises’ principal owners, together holding about 40% of the company’s stock. Their mother, Opal Winn Bangerter, founded the chain in 1965.

The reorganization plan, presented Friday in U.S. Bankruptcy Court in Los Angeles, would allow the company to retire its entire $80-million debt to unsecured creditors by giving those creditors an 85% equity interest in the company in the form of stock. Ownership of the firm by Care’s existing shareholders, including the Bangerters, would be reduced to 15%.

Peter Landsberg, attorney for the unsecured creditors committee, said the plan also calls for retiring Care’s $40-million bank debt in about three years. He said the first $10 million would be paid “fairly promptly” and may be raised from the sale of nursing homes. Other payments, he said, will be made out of operating profits.

Attorneys for both the company and creditors said the compromise plan was reached in part to avoid a lengthy debate over various competing reorganization proposals. Also, litigation was scheduled to begin Aug. 8 over a demand from the creditors to have the management of Care turned over to a court-appointed trustee.

“We figure there will be millions of dollars saved in administrative costs by avoiding extensive litigation over a plan and the appointment of a trustee,” Kupetz said.

Care Enterprises, one of the nation’s largest nursing-home operators, filed for protection from creditors in March, 1988.

In court filings, creditors accused the company’s top management of engaging in insider trading, manipulating earnings reports and generally profiting from corporate transactions at the expense of Care bondholders, shareholders and employees.

Many of the allegations involved actions by the Bangerters.

Previously the Bangerter brothers were key players in the development and demise of Winn Enterprises, a family operated conglomerate with far-flung investments, for a time including Knudsen Foods.

Since entering Chapter 11 proceedings, Care Enterprises’ financial health has improved. The company recently reported that it earned $273,000 in the first quarter of this year, a reversal from a $4.1-million loss in the same period a year earlier.