23 Muni Bond Payment Defaults Sets Record for Retirement Community Sector

Twenty-three retirement communities have reported first-time payment defaults on municipal bonds in 2020.

Since 2009, the retirement sector has never before posted more than 22 defaults in a given calendar year, according to a recently released report from Municipal Market Analytics (MMA). That previous high of 22 was recorded in 2016.

So far in 2020, 52 muni borrowers across all sectors have recorded first-time payment defaults, representing $5.04 billion of outstanding principal, the MMA report showed. The retirement sector has been the hardest hit. In addition to having the most first-time payment defaults, the sector also has had the most emergency draws (13) on contingent security provisions such as reserve funds and bond insurance to avoid default.

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Source: MMA

Among borrowers to make new credit impairment disclosures between Aug. 3 and Aug. 6 was a continuing care retirement community (CCRC) in Tennessee, which was under financial duress prior to the Covid-19 pandemic, according to filings on the Electronic Municipal Market Access (EMMA) system. Financial distress has increased throughout the senior housing and care sector in 2020, and smaller providers and those experiencing financial challenges before the pandemic have been particularly vulnerable.

Senior housing bond defaults have loomed since the pandemic began spreading across the United States in the spring. In May, Moody’s reported that senior housing had been hit harder than any other U.S. public finance sector, given the combination of rising expenses and falling revenue experienced by these organizations.

The government has been slow to provide financial relief to senior living communities that primarily rely on private-pay revenues rather than Medicare or Medicaid. However, the Department of Health and Human Services (HHS) is planning to make funds available to private-pay assisted living communities soon, the American Seniors Housing Association (ASHA) stated last week.

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