Genesis HealthCare has asked a federal judge to help it quickly shed costly leases and abandoned facilities but retain employees who might be worried about the company’s future now that it is in bankruptcy.

During a five-hour hearing Friday, the company asked Judge Stacey G Jernigan of the US Bankruptcy Court for Northern Texas for relief in 16 separate subject areas as it begins a restructuring and sale process that it announced via a late-night court filing Wednesday.

Hundreds of pages of documents revealed the company has winnowed its operations to 175 facilities in 18 states, down from its peak of more than 500 in 2016. It plans to be even leaner by the time it finalizes a sale, a process it plans to complete by Feb. 4, 2026.

On Thursday, attorney Emily Keil, representing Genesis and its affiliated companies, said the organization plans to terminate leases with facilities that “already closed, are in the process of being closed or have already transitioned to new operators.”

A list submitted to the court Thursday included 15 properties in states stretching from New Hampshire to Colorado. Genesis is still on the hook for rent for operations that are now being handled by providers such as Ignite Medical Resorts in Kansas City, and some that had already been reassigned by landlord Sabra Healthcare REIT.

Genesis “will likely file additional motions with respect to rejection of leases that are involved with current facility operations, but obviously that will also involve transitioning those operations to new operators,” Kyle said. “The transition has to happen before the rejection. We’ll file that later into the cases.”

The court will hear more on the initial lease rejections at a second hearing on Aug. 5.

Jernigan on Friday approved more than a dozen other motions, including several designed to keep employees working and site-level operations funded throughout the bankruptcy process.

“This is undoubtedly a financial restructuring. We certainly have economic stakeholders, but we also have non-exonomic stakeholders that will be top of mind throughout the process,” said Dan Simon, another Genesis attorney. “These are our residents in the facilities. These are our patients that we provide support through our Powerback [service] line. These are our 27,000 employees.”

Simon called the employee base “fragile,” noting the company’s long-term financial struggles, which were exacerbated by the pandemic. Many of its staff are “low-income, day-to-day working folks that rely on being able to have a job, rely on their paychecks and having their benefits available,” Genesis co-chief restructuring officer Louis E. Robichaux IV testified Thursday. 

“Fifteen thousand patients are cared for by those 27,000 employees, and we need to try to minimize disruption in this process to their day-to-day lives,” he added.

Jernigan approved an emergency motion allowing Genesis to continue paying wages, compensation and employee benefits — including retention and attendance bonuses for frontline staff — while in Chapter 11.

“Wthout the employees, there is no business,” another Genesis attorney said. “The loss of the employees would be devastating to this business. … These are the kinds of things that are important to keep morale up.”

In addition, Jernigan agreed to allow Genesis permission to pay its “mom and pop” vendors, especially those in rural areas that may not have highly structured contracts and may not agree to perform services without immediate payment. 

One key to making that happen was interim approval of access to debtor-in-possession financing that Genesis sought to pay local vendors and other obligations, including some taxes, in coming weeks. Jernigan ruled the company can use up to $12 million of its $30 million in new funds in the next four weeks.

The initial request to borrow from current lenders, including Omega Health Investors, seemed to be a pro forma matter as presented in Wednesday’s filing. But in court Friday, one of Genesis’s largest creditors objected to the terms, with an attorney arguing it had not been given an opportunity to loan Genesis more money, won’t have a say in how the company’s current collateral is spent and isn’t necessarily privy to future decision-making.

Robichaux told the court that White Oak Healthcare Finance — which Genesis owes nearly $280 million — was aware of the company nearly missing its payroll obligations last Wednesday. That, he said, could have turned negotiations to borrow more money into an opportunity for White Oak to instead pull back from its relationship and shrink its liquidity.

Instead, Genesis executives decided not to notify White Oak of its intent to file for bankruptcy until it had actually done so, Robichaux testified.

The next hearing for additional relief and extensions is scheduled for Aug. 5, with the first meeting for creditors set for Aug. 18.