CHICAGO — A bankruptcy court judge in Chicago has signed off on the $53.5 million purchase of the assets of an upscale continuing care retirement community that provides a recovery rate of about 24 cents on the dollar for secured creditors, including most holders of $229 million of municipal bonds.

Judge Susan Pierson Sonderby, of the U.S. Bankruptcy Court for the Northern District of Illinois Eastern Division, approved The Clare at Water Tower’s reorganization plan and asset sale to Harrison, N.Y.-based Senior Care Development LLC at a hearing late Tuesday, according to lawyers involved in the case.

The ownership change of the upscale CCRC in downtown Chicago to Senior Care from its current sponsors — the Franciscan Sisters of Chicago Sister Corp. — still requires state regulatory approval. It is expected in five to six weeks. Officials anticipate closing on the sale by the end of June, at which time bondholders would receive their payout, an attorney representing bondholders said. During the hearing Tuesday, lawyers said various objections to The Clare’s reorganization were settled or dismissed.

Senior Care, which won the bidding for the facility in partnership with Fundamental Advisors LLP and Life Care Companies LLC earlier this month, will pay $53.5 million in cash for the facility’s assets. Secured creditors can expect a recovery rate of about 24% after various debts are retired, including administrative claims, $2 million owed in deferred rent to the building’s owner Loyola University of Chicago, and debtor in possession financing, according to court filings.

The recovery rate for bondholders will vary by a few cents on the dollar for some based on their claim on remaining reserves held by trustees. A small group of bondholders who rejected a 2010 restructuring will be made whole on their investment.

“While it’s not good, it’s still more than people had expected based on the original bid,” a lawyer said. Senior Care’s initial bid after negotiations with The Clare’s owners offered just $29.5 million. Two additional qualified parties emerged resulting in an auction earlier this month that drove the price up. In addition to the cash bid, Senior Care will make good on about $57 million in expensive entrance deposits paid by residents. “It was a very successful bid,” according to the lawyer.

Senior Care takes over a facility with a balance sheet now cleared of the debt that eventually drove the former operators into bankruptcy.

Almost out of cash to keep operating, the CCRC filed for Chapter 11 in November. Since it opened in December 2008, The Clare has struggled to fill its units. At the close of last year, only 34% were occupied.

It defaulted on an installment payment due Sept. 1 to cure a shortage in its debt service fund on its fixed-rate bonds, triggering a default under its loan agreements. The CCRC also did not pay letter-of-credit fees or reimburse the bank for an interest draw on its floating-rate securities.

The Clare issued $229 million of debt through the Illinois Finance Authority in 2005, with Ziegler Capital Markets Group as underwriter. The issue included $91.5 million of fixed-rate bonds in A, B and C series, $125 million of variable-rate tax-exempts, and $12.5 million of variable-rate taxable bonds. Bondholders took a haircut in 2010 under a restructuring plan that eased near-term pressures, but The Clare asked for more time last year in a forbearance agreement that bondholders rejected.

The Franciscan Sisters blamed the facility’s struggles on the 2008 housing crisis that drove down home values. It left seniors planning to move into the facility unable to sell their homes at a price needed to cover the expensive entrance fees.

Bank of America, which had provided a letter of credit on the floating-rate bonds, now holds that debt, while the fixed-rate bonds are held by a handful of institutional investors. Bank of New York Mellon Trust Co. is the trustee. The 2005 bonds were secured by a pledge of project revenues, leasehold mortgage and a security agreement.

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