NEW YORK, Dec 17 (Reuters) - Genesis Healthcare ( GENNQ ) is

preparing for a new auction of its 175 long-term nursing homes

in January, after a judge refused to approve an insider bid that

would have left the same ownership group in charge after the

company's bankruptcy.

Daniel Simon, the company's bankruptcy attorney, said at a

Wednesday court hearing in Dallas that the company is working

with creditor representatives and hoping to conduct a new and

more open auction in mid-January.

While Genesis was "humbled" by the rejection of its initial

sale proposal, the new auction must proceed quickly if the

company's nursing homes are going to survive under new

ownership, Simon said in court.

"We have one shot to get this right," Simon told U.S.

Bankruptcy Judge Stacey Jernigan.

Genesis, which operates 175 skilled nursing facilities and

assisted living facilities in 18 U.S. states, filed for

bankruptcy on July 9 with over $2.3 billion in debt. The company

said it was struggling because of high debt racked up during a

period of expansion and acquisition, difficulty in retaining

nursing staff, and a growing number of lawsuits over the quality

of healthcare at its facilities.

Genesis faces more than 200 lawsuits alleging malpractice,

wrongful death or other injury. At the time of its bankruptcy,

the company said it owed $259 million to plaintiffs, including

settlements that the company had agreed to pay, while plaintiffs

have argued the company owes far more.

Jernigan said last week that she would not approve Genesis'

proposal to sell its assets to a shell company affiliated with

Genesis' current private equity owners, Pima Capital Partners

and ReGen Healthcare.

The proposed deal would have allowed the same ownership

group to maintain control of the company's nursing homes while

using bankruptcy to slash debts and medical malpractice claims.

Several creditors, including people who had sued Genesis,

had argued that the company's previous auction was "skewed" to

favor the insider bid.

Jernigan said she wanted junior creditors' representatives

to "take point" on the new auction, and she said the sale should

not release legal claims against company insiders. Andrew

Turnbull, an investment banker for Genesis' junior creditors,

said at Wednesday's hearing that he was working with Genesis to

reach agreement on the procedures for the new auction, and he

said that he heard from four or five additional bidders who

could participate in the new auction.

In the November auction, Genesis received two bids from

outside companies, and many creditors spoke up last week in

support of a proposal from potential buyer Genie 3 Partners.

The case is Genesis Healthcare Inc ( GENNQ ), U.S. District Court for

the Northern District of Texas, No. 25-80185

For Genesis: Daniel Simon of McDermott Will and Schulte

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