A reorganization plan for Eagle Senior Living will reduce the company’s debt by approximately $40 million and promises $28 million in new financing, according to the operator’s attorney. The U.S. Bankruptcy Court for the District of Delaware approved the plan Wednesday.
The Wilmington, DE-based company operates independent living, assisted living and memory care communities in Alabama, Colorado, Florida, Minnesota, Ohio, Tennessee and Wisconsin.
Eagle initiated a voluntary Chapter 11 process in January in a move to strengthen its financial structure and provide flexibility to make necessary capital improvements. Parent company American Eagle Lifecare Corp. and management company Greenbrier Senior Living were not included in the filing.
“We’re very pleased with the outcome. What we achieved, that was our goal the whole time,” attorney David Gordon of the law firm Polsinelli told the McKnight’s Business Daily. The Kansas City, MO, firm was lead counsel for Eagle.
“The debt restructuring caused the company significant debt relief,” Gordon said, adding that the Eagle began restructuring negotiations 11 months ahead of the Jan. 14 Chapter 11 filing.
The company’s bond debt is broken into three tranches, he said. The A tranche was $171 million, the B was $36 million and the C was $24 million.
The A bond debt will be reissued at the original $171 million, but with lower interest rates and amortization to push the payments into the future for the time being, the attorney said. The interest rate was reduced to 5%, with interest-only for payments for the first four years. The maturity of the debt has been extended to 35 years.
“It will get us a little more wiggle room,” Gordon said.
The interest on the B bond debt will be reduced to $18 million, the interest is reduced to 2%, and the debt will not mature for 35 years.
The company has managed to eliminate 90% of the $44 million in C debt, according to the attorney. The 10% of the C debt that remains doesn’t bear any interest over 35 years, he said.
Also as part of the restructuring plan, bondholders have agreed to re-invest in Eagle, bringing in $28 million in “new money from our investment A bondholders,” Gordon said. The money will be invested in capital expenditures that the company needs to make over the next four years, he said, “and make sure we have sufficient liquidity coming out of Chapter 11.”
As part of the restructuring agreement with bondholders, Eagle is selling two underperforming properties. Ventura Hills in Texas already has been sold, and Vista Lake in Florida is expected to close June 15.
“Once that’s done, we can declare the effective date of the plan, and we will have completed the Chapter 11,” Gordon said.
