SunwestManagement

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The Blackstone / Emeritus Joint Venture will become the stalkinghorse bidder in a bankruptcy auction that is scheduled for May 17.The pending sale was approved by US District Court Judge MichaelHogan.

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The transaction will include a combination of cash, securities,and assumption of debt. The Blackstone / Emeritus Joint Venturewill purchase most of the assets of the consolidated Sunwestenterprise. Existing investors and other claimants in thebankruptcy estate will be permitted to exchange their claims foreither cash or up to 49% of the units in the venture.

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Sunwest chief restructuring officer Clyde Hamstreet calls theHogan's decision "a very promising transaction for Sunwest'sinvestors and other creditors of the bankruptcy estate." He saysthat Hogan, "employed an effective mediation strategy, using[retired Lane County Circuit Court Judge] Lyle Velure as mediator,to resolve most of the financial and legal complexities anddisputes."

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Hamstreet says that the approach allowed hundreds of Sunwestentities that were on the verge of liquidation to be consolidatedinto a single viable business. "That act alone created significantvalue for the estate to the benefit of investors, lenders, andother creditors," Hamstreet said in a prepared statement.

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The Court selected the Blackstone / Emeritus Joint Venture asstalking horse bidder over a competing proposal from AEW CapitalManagement, which sought to make a preferred investment in thereorganized company. The two proposals were presented to the Courtby Hamstreet, receiver Michael Grassmueck and a committeerepresenting investors. Earlier in March, the Court appointed anindependent expert, Bettina Whyte of Bridge Associates, LLC, tofacilitate final negotiations with both Blackstone and AEW andassist in evaluating the competing proposals.

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The court approved bid procedures to govern an upcoming six weekbidding period, and is expected to appoint an investment banker toadvise the estate during the bidding and auction process. As leadbidder, the Blackstone / Emeritus Joint Venture will have customaryoverbid protection and will receive break-up fees if another biddermakes the highest and best bid at the auction. Closing of the salewill be subject to customary conditions, confirmation of Sunwest'splan of reorganization, completion of loan modifications, andtransfers of operating licenses. Closing is expected to occur inJuly.

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