A senior-living company filed for bankruptcy last week after it exhausted an emergency loan, the latest to falter because of Covid-19.
Nashville Senior Care LLC's plight illustrates the pressures bearing down on the senior-living sector. Higher staff and supply costs on top of tepid demand for such facilities have caused defaults to outpace the rest of the municipal bond market this year. About 8% of the $43 billion in outstanding senior-living bonds is in default, compared with less than 1% of the total municipal bond market, according to data compiled by Bloomberg.
At Nashville Senior Care, the pandemic shutdown lowered the number of residents "precipitously," while expenses rose "dramatically," leaving the facilities without the means to make needed investments, executive director Thomas Johnson said in a court filing.
"This difficult combination of rising costs and a lower census, coupled with a high debt load from their financing, led to the Debtors' default under their bond documents," added Johnson, founder of the nonprofit Trousdale Foundation, which owns the facilities.
The operator of five senior living facilities and one home health company in Tennessee, Florida and Ohio listed assets of $50 million to $100 million and liabilities of $100 million to $500 million, including about $213 million in municipal bond debt. Its bonds have been hit hard by the pandemic. A bond, issued by Highlands County Health Facilities Authority, Florida, due in 2038 with a 6% coupon traded at 12 cents in June.
Invesco was the biggest bondholder as of June 30, with about $77 million, according to data compiled by Bloomberg. A spokesperson for Invesco declined to comment.
Impacted by the Aug. 14 Chapter 11 filing are bonds issued through the Highlands County authority, Montgomery County, Ohio, and The Health and Educational Facilities Board of the Metropolitan Government of Nashville and Davidson County,
Nashville Senior Care, is seeking court approval of Cascasis, LLC, as the stalking-horse bidder willing to buy the company's assets for $41 million.
An "acute liquidity crisis" in the weeks before the filing led the company to seek an emergency loan from its trustee, UMB Bank N.A., of $1.35 million so it could continue to operate as it prepared to file for bankruptcy protection and find a new owner.
The company is seeking court approval to borrow an additional $4 million from UMB for a total of $5.35 million in debtor-in-possession financing. Five other lenders contacted by the company's adviser, Houlihan Lokey, to provide junior debtor-in-possession financing declined, according to a court filing.
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