After months of negotiations, a lender owed millions by Northeast Ohio Neighborhood Health Services says it’s losing faith in reaching a settlement with the nonprofit health clinics and instead plans to foreclose on its properties.
NEON, which has served patients on Cleveland’s East Side for nearly 60 years, operates six clinics and a mobile health unit. A court filing on Feb. 18 does not say which buildings the lender wants to foreclose on, and the company still needs to file a request in court to officially seek foreclosure.
“All Pro Capital has taken extraordinary measures — beyond those of a typical lender — to ensure NEON could continue to operate and provide services to its community,” the latest court filing read. “Those efforts, however, have not resulted in meaningful progress toward repayment.”
Signal Cleveland emailed NEON’s lawyers and CEO, Willie Austin, for a comment on All Pro Capital’s decision to seek foreclosure. We will update the story if they respond.
Last May, the New Jersey-based lender, All Pro Capital, asked a federal judge to put NEON into receivership, which would grant a court-appointed third party power over the health care agency in hopes of recouping the millions it is owed.
In December, the parties asked the court to pause the receivership request so they could try to hash out a resolution to repay the debt and keep the clinics operating. In the meantime, staff at the clinics missed paychecks and had their health insurance canceled.
NEON’s failure to make payroll and to pay benefits were just one concern All Pro Capital said it had. The primary challenge is that NEON is “not even reasonably close” to being able to pay back its debt to All Pro Capital, the court filing said.
That’s why the company is now withdrawing its request for receivership and plans to instead seek foreclosure. Court records show that NEON granted All Pro Capital a mortgage on much of the nonprofit’s property – including five of its operating health clinics, the temporarily closed Miles Broadway Health Center, the closed Hough Health Center and the group’s headquarters on Payne Avenue.
The mortgage gives All Pro Capital the ability to take over the properties and sell them if NEON defaults on the loan.
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For weeks, NEON and All Pro Capital have been meeting to discuss how the health center can pay back its loan of $8.6 million. In updates posted to the federal court docket, NEON’s lawyers said the nonprofit was trying to secure “replacement funding” from a third-party lender.
In the most recent court filing, All Pro Capital said that NEON has not provided it with “the necessary supporting documentation” for this financing. Plus, the money was not enough to cover even half of NEON’s debts, the court filing said.
Receivership to foreclosure
In November, a judge granted All Pro Capital’s request for a receiver to run NEON, over the objections of the nonprofit. NEON said in filings at the time that the appointment of a receiver could threaten its ability to provide health care. Receivers can have a wide range of powers, including selling properties and making organizations more profitable.
All Pro Capital said in a statement last summer, after it filed for receivership, that it was aware of the “important services” NEON provided in nearby neighborhoods. The company, it wrote, would “be supportive of solutions that will allow such services to continue.”
In the latest court filing, All Pro Capital seems to be laying out a more dire future.
All Pro Capital no longer believes that NEON has the resources or ability to remain” financially viable, even under the management of a receiver, the filing said.