Amsterdam at Harborside plans to file for Chapter 11 protection tonight or early tomorrow morning in the Bankruptcy Court of the Eastern Division of New York, the retirement community's chief executive officer Jim Davis and the facility's financial advisor, Andrew Nesi of HJ Sims said in an exclusive interview with The Bond Buyer.
The proceedings are expected to be "short in the world of bankruptcy," and the Amsterdam should emerge "by fall," Davis said. "We're encouraged that [the restructuring plan] has the support of 75% of the par amount of bondholders."
The plan to be proposed in court will be the same as that accidently released on Friday morning. The Amsterdam's bond trustee, UMB Bank, mistakenly posted the Nassau County, N.Y. retirement community's restructuring plan prematurely on the Municipal Securities Rulemaking Board's EMMA website, only to promptly remove it and replace it with a blank PDF. Davis said the mistake was one of timing, not of accuracy, as the consent from the Amsterdam's board of trustees had not been granted when the notice was originally posted.
The pre-negotiated restructuring plan, which has been in the works for about a year, won't forgive any of the continuing care retirement community's $230 million outstanding debt. It will exchange the Series 2007 bonds for a serialed Series 2014 issuance. For the 2007A and 2007B bonds, 75% of the holdings will be exchanged for the newly issued 2014A bonds. These bonds will have contracted interest rates identical to that of the original 2007 issuance, ranging from 5.875% to 6.70%, and feature a set amortization schedule, Nesi said.
Meanwhile, the remaining 25% will be exchanged for a Series 2014C bond. Both its 2% coupon and principal will only be paid out of excess cash flow from entrance fees. The Series 2014C bond will mature in 2049, but have no set amortization schedule.
"We view it as more of a balance sheet restructuring," Nesi said. "There's no forgiveness of debt, no write offs, and we're not asking bondholders to receive less than par, we're just restructuring the way that they receive those dollars."
Because the plan features an exchange with senior and subordinate debt, as well as maturity extension, 100% bondholder consent would be required outside of a plan confirmed by a bankruptcy judge, Davis and Nesi said. Because the CCRC debt market is proliferated with retail holders, finding the identity of 100% of holders would be almost impossible, let alone getting full consent.
The plan has the approval of the New York State Department of Health and the New York State Department of Financial Services, two state offices that the Amsterdam was at odds with during the negotiations leading up to the filing. New York, like Florida, is a particularly heavily regulated state for senior living facilities, requiring CCRCs to maintain high liquidity reserves to protect residents.
To maintain "business as usual" The Amsterdam has also agreed to escrow any entrance fees from sales made after June 1, said Nesi.
"By doing this, the funds will not be available to use as collateral for the bankruptcy and a resident can move in with confidence," said Nesi.
In addition to funds from new sales, all resident fee agreements will be honored and not impaired during the Amsterdam's bankruptcy proceedings, Nesi confirmed.
Trading on the CCRC's bonds don't reflect confidence in the new restructuring plan. Yields on the senior-most Series 2007A 6.7s maturing in 2043 have not moved since 10 July, remaining around 12.15%.
The CCRC is represented by Cadwalader, Wickersham & Taft LLC. Bondholders are represented by Mintz Levin.
