The senior living bond market continues to grapple with bankruptcies and new defaults on the horizon as financial distress persists at the tail end of 2022
Senior living companies accounted for more than $600 million in first-time payment defaults, representing about 46% of the $1.33 billion of total first-time defaults so far in 2022, according to research from Bank of America Research cited by industry publication The Bond Buyer
BofA Research also shows first-time defaults could reach as high as $2.1 billion in the coming year.
Municipal Market Analytics data cited by the report showed Florida and Texas had the highest number of first-time payment defaults on bonds for bonds issued for IL, AL, skilled nursing and other senior living communities.
Christian Care Communities & Services, which operated three communities in the Dallas Market, has a hearing scheduled for January 2023 for the final approval of a disclosure statement and confirmation of a Ch. 11 bankruptcy plan.
In May of this year, Christian Care reportedly owed just under $51 million in outstanding principal and about $3 million in unpaid interest on bonds it sold back in 2014 and in 2016 through the Mesquite Health Facilities Development Corporation, according to a report by the Bond Buyer. Its assets reportedly totaled about $52.4 million.
Also earlier this year, Eagle Senior Living moved forward with a Ch. 11 bankruptcy meant to give it needed funds and reduce some of its debt.
Fitch Ratings recently gave the life plan community sector a “worsening outlook,” for 2023. While the senior living industry is preparing for strong future demand, financial distress caused by the Covid-19 pandemic and the subsequent fallout have made the situation particularly tricky for operators.
The Bond Buyer spoke to MMA Managing Director Lisa Washburn, who noted that in the years leading up to the pandemic, there was an increase in high-yield borrowing activity that was structured to factor in high occupancy levels in the coming years. But those plans didn’t come to fruition when the Covid-19 pandemic reared its head in 2020.