CHICAGO – Friendship Village of Sunset Hills, Missouri, will sell $58 million of bonds this week to fund a major expansion of its retirement village outside of St. Louis.

Cain Brothers is the senior manager with the Industrial Development Authority of St. Louis acting as the conduit issuer. The formal name of the borrower is Friendship Village of South County.

The bonds will be secured by a pledge of gross revenues of the obligated group, a mortgage on substantially all obligated group property, and equipment. The series 2013A bonds for $41 million will be additionally secured by a debt service reserve. The B series is for $17 million.

Ahead of the sale, Fitch Ratings lowered Friendship Village’s rating to A-minus from A. “The downgrade to A-minus reflects FVSH’s significant increase in debt, coupled with risk associated with its independent living unit expansion project,” the report read.

Fitch said FVSH will have two years of capitalized interest through 2016 and it’s expected to pay down its series 2013B debt using entrance fee proceeds by 2017.

Proceeds will finance phase 1B of a multi-phase capital plan, which includes an 88-unit independent living unit expansion and other campus renovations. No future phases are currently planned, and they would be conditional based on market and financial conditions.

Friendship Village operates a life care continuing care retirement community on 52 acres in Sunset Hills, Missouri, about 16 miles southwest of St. Louis. Total revenues of the obligated group equaled $20.8 million in fiscal 2013.

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