A Florida continuing care retirement community has emerged from Chapter 11 bankruptcy after successfully restructuring about $62 million of debt.
The Jacksonville-area CCRC, sponsored by not-for-profit organization Life Care St. Johns d/b/a Glenmoor, entered a formal restructuring process in early July 2013, with its plan receiving near-unanimous approval by all parties involved.
At the time of the bankruptcy protection filing, Glenmoor had about $55 million of outstanding bond debt and owed about $7.8 million in entrance fee refunds to former residents or their estates. The economic recession was cited as the contributing factor for not attracting new move-ins.
The entrance-fee model CCRC has 159 independent living units and is required to maintain occupancy at 90%, but saw census dip as residents moved out and refund obligations mounted.
Florida state law requires refunds under Type A contracts to be paid within 120 days of the contract termination notice, and by May 31, 2013 Glenmoor owed 29 residents nearly $7.8 million in refunds, some dating back to January 2011. By July, the state had rejected two of Glenmoor’s corrective action plans and initiated placing the CCRC into receivership until the refund obligations were resolved, triggering the bankruptcy protection filing.
The restructuring plan includes the assumption of all the resident contracts and only a mild haircut for the bondholders, according to Bruce Jones, CEO of LCPS Management, Glenmoor’s operator.
“We are not getting a break on the principal [of the outstanding bonds], as projections showed we were a victim of the recession and the inability of people to sell their homes,” Jones told SHN. “Glenmoor is seen as a viable entity, and we will be able to pay the principal in full.”
As part of the restructuring, Glenmoor’s payments on its Series A bonds will be interest-only for the next five years at a scaled interest rate. Through December 31, 2015, the interest rate will be 1.344%, scaling up to 5.375% and resulting in only “a bit of a haircut” for the bondholders, Jones says. In five years, the CCRC will pay both principal and interest on the bonds at the ending rate.
There are also Series A and B notes for the refund queue of estates who were due a refund at the time Glenmoor filed last July. In the next five years, Glenmoor will pay 60% of what is due to those estates, starting with an initial payment of $813,000 out of an escrow account, according to Jones.
The remainder of the refunds, along with the CCRC’s Series B bonds, will then be paid out of excess cash flow going forward.
Trade payables covering the costs of operating Glenmoor were funded on April 15, when the CCRC emerged from bankruptcy. The community is also renewing its marketing efforts as it exits bankruptcy protection, says Jones.
“We’ve seen a good deal more interest, and the current residents are very involved and supportive of us,” he says. Occupancy in the CCRC’s independent living units is still beneath covenant levels at 85% as of the end of February, according to a case file, with assisted living occupancy at 75% and 87% for the skilled nursing beds.
However, Jones says that planned new construction of about 28,000 residential units in the surrounding region could create something of a boom, and there are also new highway systems in the works that will connect to nearby Interstate 95 and make the area—and Glenmoor—easier to access.
“Our goal was to find an outcome that provided the best returns and protected our residents,” Jones said in a statement announcing the restructuring. “By not selling to several groups interested in acquiring Glenmoor, the bond holders demonstrated their confidence in the LCPS Management team and the Glenmoor staff’s ability to successfully lead this community into the future.”
Written by Alyssa Gerace
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