CHICAGO — Blaming a bad housing market and the failure to reach an agreement with bondholders, an Ohio senior-living facility that missed its most recent debt-service payments filed for Chapter 11 protection last week.

Franciscan Communities St. Mary of the Woods Inc. said it would seek to reorganize while looking for a buyer that can take over the facility, located in Avon, about 20 miles west of Cleveland.

The Toledo Lucas County Port Authority, acting as a conduit, issued $40.5 million of revenue bonds in 2004 to finance construction of the 23-acre, 158-unit campus. Roughly $35 million of bonds remain outstanding.

The debt was issued in three series with different security structures. The trustee of one of the series called the bonds Tuesday in a mandatory tender that was triggered by a notice of default.

Original interest rates on fixed-rate debt ranged from 5.25% to 6%. Recent trading on a piece of the Series A bonds saw the debt selling for 29 cents on the dollar.

Like the continuing-care retirement community sector as a whole, has suffered from investment income losses — which typically make up a substantial part of their revenue — and a weak housing market that has made it tough for seniors to sell their homes and move in.

St. Mary of the Woods is managed by the Franciscan Sisters of Chicago Service Corp., which also manages the Clare at Water Tower, an upscale retirement community in downtown Chicago that filed for bankruptcy in November.

The Franciscan Sisters of Chicago has agreed to give St. Mary of the Woods a $4.5 million loan to allow it to continue day-to-day operations throughout the bankruptcy process.

The facility has assets of approximately $36 million and liabilities of $48 million, according to documents.

"During the past few years, CCRCs, including SMOW, have suffered substantial declines in sales and occupancy, and have faced various obstacles in their construction and development as a result of the struggling economy, the weakened credit environment, limited access to capital, and declining real estate values, among other things," Judy Amiano, president and chief executive officer of Franciscan Sisters of Chicago and St. Mary of the Woods, said in bankruptcy documents filed in the U.S. Bankruptcy Court Northern District of Ohio in Cleveland.

The facility made cuts and launched negotiations with bondholders in August to try to restructure the 2004 bonds "to a level of indebtedness that is sustainable for the long-term health of SMOW's business," Amiano said.

Talks failed, and the facility filed for Chapter 11 protection Nov. 21.

The original bond sale included $10.9 million of fixed-rate term bonds maturing in 2014, 2024, and 2034; a Series B that consisted of $4.8 million of so-called extendable-rate adjustable-rate bonds; and a Series C that consisted of $24.7 million of weekly floating-rate bonds.

The conduit issuer filed disclosures in November announcing that the borrower failed to make principal and interest payments due Nov. 10 on Series A and B.

The bond trustee dipped into the debt service reserve fund to make the Nov. 15 interest payment and will likely do the same to cover the May 15, 2012 principal payment, disclosure documents said.

The use of reserve funds does not constitute a default, documents said.

A separate disclosure document shows that St. Mary of the Woods did default on the Series C bonds, which triggered the mandatory tender.

The trustee on those bonds, Bank of New York Mellon NA, called the Series C bonds on Tuesday.

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