Completes initial phase of debt restructuring
covering 49 assets financed by Fannie Mae and Ally Bank
Fannie Mae agreement will result in
approximately $40 million of additional free cash flow over the
next three years
Conversant Capital, Sonida’s largest
shareholder, provides $13.5 million equity commitment, available to
Sonida at its option over 18 months
Sonida Senior Living, Inc. (the “Company”) (NYSE: SNDA), a
leading owner-operator of communities and services for seniors,
announced several steps the Company has taken to enhance its
financial position and strategic capabilities.
On June 29, 2023, Sonida entered into a comprehensive
forbearance agreement with Fannie Mae as the first of a two-step
process to modify all existing mortgage agreements with Fannie Mae
by the end of Q3 2023. In the second step, Sonida and Fannie Mae
have agreed to exercise commercially reasonable efforts to enter
into a loan modification agreement for each of their existing
mortgage agreements on or before September 30, 2023. The terms of
the proposed loan modification are set out in an agreed upon term
sheet contained in the forbearance agreement and are subject to
certain conditions customary for a transaction of this nature, as
set forth in the forbearance agreement. The forbearance and
subsequent loan modification provide the Company with additional
financial flexibility to build on its strong operational momentum
and pursue its strategic growth plan. Ironhound Management acted as
an advisor to the Company in its discussions with Fannie Mae.
Additionally, the Company secured a $13.5 million equity
commitment, available in part or in whole at the Company’s sole
discretion for 18 months, from Conversant Capital, the Company’s
largest shareholder, and modified the covenants on its loan with
Ally Bank.
Under the Fannie forbearance agreement and beginning with the
June 2023 payments, Sonida will make reduced debt service payments
in contemplation of the loan modification terms and will continue
to do so through the forbearance period. In addition, and in
consideration for the forbearance, Sonida made a $5.0 million
payment to be applied against the existing loan balances in
conjunction with the execution of the forbearance agreement.
Key elements of the subsequent loan modification will
include:
- All maturities will be extended to December 2026 or
beyond.
- All contractually required principal payments under the 37
Fannie Mae loans will be deferred for three years or waived until
maturity, resulting in $33.0 million of cash savings through
maturity.
- Sonida will receive near-term interest rate reduction on all 37
assets, resulting in $6.1 million in cash interest savings over the
next 12 months.
- The Company expects the loan modification to be finalized by
September 30, 2023, per the terms of the forbearance
agreement.
- In consideration for the loan modification, Sonida will provide
a second $5.0 million payment on June 1, 2024, to be applied
against the existing loan balances.
In connection with the completion of the Fannie Mae forbearance
and the Conversant equity commitment, Ally Bank has agreed to
temporarily reduce the minimum liquidity requirement under its
$88.1 million facility for 18 months subject to certain conditions
that the Company expects to meet.
Conversant Capital has committed to purchase up to $13.5 million
of common equity at $10 per share, a 30% premium to the stock’s
30-day volume weighted average price, over the next 18 months.
Sonida shall have the right, but not the obligation, to utilize
Conversant’s equity commitment and may draw on the commitment in
whole or in part. The Company intends to draw $6.0 million in July,
in conjunction with the first $5.0 million principal payment to
Fannie Mae. The remaining funds may be drawn as needed for general
working capital needs or to fund the second $5.0 million loan
paydown to Fannie Mae.
“We appreciate the collaborative approach from our lending
partners to make these commercially compelling modifications to our
debt structure,” said Brandon Ribar, President and CEO of Sonida
Senior Living. “These developments provide the Company with greater
financial flexibility and runway to continue delivering operational
improvement while providing the balance sheet capacity to pursue
attractive growth opportunities, including both asset acquisitions
and third-party management contracts.”
“We are pleased to support Sonida during this pivotal time and
to facilitate this important step to secure the Company’s balance
sheet with additional equity capital,” said Michael Simanovsky,
Founder and Managing Partner of Conversant. “We believe that the
current environment offers a compelling opportunity for Sonida, and
we look forward to working with the Company and its world-class
executive team to capitalize on the extremely attractive
demographic and industry trends we see in senior housing to deliver
value for residents, team members, the communities we operate and
investors.”
The Company is in discussions with Protective Life Insurance
Company in an attempt to resolve its non-compliance on certain
non-recourse mortgage loan agreements totaling $72.1 million for
four of the Company’s communities.
Operational Update
The Company delivered strong occupancy, rate, total revenue and
margin growth in Q1 and anticipates each of those trends to
continue in Q2. Spot occupancy ended May at 85.0% for its 62 owned
communities and May average occupancy increased 45 basis points
over April. These strong occupancy results are attributable to
numerous strategic initiatives implemented by the Company’s
operating team and align with Sonida’s increased focus on
maximizing Net Operating Income across the portfolio.
“This operating momentum, combined with our improved balance
sheet, positions us well to capture the incredibly attractive
opportunities we see in our sector as demand grows amidst a
prolonged suppression of supply. Our new leadership team plans to
seize this opportunity and drive increased cash flow through a
combination of growth investments and continued delivery of our
excellent resident experience,” said Kevin Detz, Chief Financial
Officer.
The Company will provide additional details on its financial and
operating performance in connection with its Q2 earnings release in
August.
Executive Appointments
Sonida also announced several new hires and internal promotions,
ensuring it has top-tier leadership in place across the
organization to continue driving growth, improving margin,
delivering an outstanding resident experience and ultimately,
creating value for its shareholders.
- Late last year, the Company announced the internal promotion of
several long-tenured Sonida team members. Carole Burnell, Dawn
Mount and Donna Brown were appointed Vice Presidents of Operations,
each running one of the Company’s three geographic operating
regions.
- Reanae Clark has joined the Company as Vice President of
Business Development and Acquisitions, and will lead Sonida’s
reinvigorated growth initiatives across all markets. Clark has more
than 15 years of experience in the senior housing sector, including
as an investor, investment banker and operator. She joins from Orix
Corporation USA where she most recently led origination and asset
management of the Orix Municipal & Infrastructure senior
housing credit portfolio.
- Michael Karicher joined the Company in Q1 as Chief People
Officer with more than 30 years of experience in human resources,
accounting and finance across industries, including both
hospitality and healthcare. Karicher joins Sonida from Remington
Hotels/Ashford Hospitality where he was Executive Vice President of
Human Resources.
- Jay Reed, who has played an integral role driving Sonida’s
digital transformation, has been promoted from Vice President of
Information Technology to Chief Technology Officer. In his new
role, Reed will assume increased responsibility for driving the
Company’s overall growth and margin improvement through enhanced
use of technology, drawing upon 15 years of various leadership
roles with high-growth hotel operators.
“Enhancing the depth and capabilities of our leadership team has
been a focus for us over the past nine months and with this mix of
new hires and internal promotions, we now have the team in place
that positions us well for success and enables us to scale our
operating platform and expand our portfolio,” said Ribar. “This
combination of growth, and operationally-focused senior talent
demonstrates our commitment to each of these critical areas of our
business.”
About Sonida
Dallas-based Sonida Senior Living, Inc. is a leading
owner-operator of independent living, assisted living and memory
care communities and services for senior adults. The Company
provides compassionate, resident-centric services and care as well
as engaging programming operating 72 senior housing communities in
18 states with an aggregate capacity of approximately 8,000
residents, including 62 communities which the Company owns and 10
communities that the Company manages on behalf of third parties.
For more information, visit www.sonidaseniorliving.com or connect
with the Company on Facebook, Twitter or LinkedIn.
About Conversant Capital
Conversant Capital LLC is a private investment firm founded in
2020. The firm pursues credit and equity investments in the real
estate, digital infrastructure and hospitality sectors in both the
public and private markets. Further information is available at
www.conversantcap.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230705822979/en/
Sonida Investor and Media Contact Kevin Detz
kdetz@sonidaliving.com Conversant Media Contact Prosek
Partners Josh Clarkson / Devin Shorey jclarkson@prosek.com /
dshorey@prosek.com
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