Brookdale Announces Beneficial Financing Transactions; Successfully Extends Debt Maturities

Rhea-AI Summary

Brookdale Senior Living Inc. (NYSE: BKD) has completed two financing transactions, refinancing all remaining 2024 debt maturities and making significant progress on a financing transaction involving eleven unencumbered owned communities. The company also sold its remaining 20% equity interest in its Health Care Services unconsolidated venture, receiving aggregate proceeds of approximately $27 million.

Insights

Financial Analyst

The refinancing of debt maturities by Brookdale Senior Living Inc. indicates a strategic financial maneuver to strengthen its balance sheet and mitigate near-term liquidity risks. By securing a new $180 million loan at a fixed interest rate of 5.97%, which is utilized to repay $260 million of impending debt, the company not only extends its debt maturity profile but also capitalizes on the current interest rate environment to lock in a relatively stable cost of capital through 2031. The inclusion of 'borrow-up' provisions further enhances financial flexibility, potentially allowing for additional capital infusion based on the performance of the secured communities.

The expansion of the revolving credit facility with Capital One, increasing the commitment by $20 million, provides Brookdale with a greater cushion of operational liquidity. This maneuver is particularly savvy given that the facility's interest rate is tied to SOFR, reflecting a transition away from LIBOR and aligning with global financial market trends. The tiered interest margin based on utilization incentivizes prudent use of the facility and may positively influence credit ratings and investor confidence.

Long-term, these financial strategies may lead to improved creditworthiness and enable strategic investments or acquisitions. However, stakeholders should monitor the performance of the underlying assets securing the loans, as their value and performance are directly tied to the company's ability to maintain its credit facilities and manage debt obligations.

Market Research Analyst

Brookdale's divestiture of its remaining equity interest in its Health Care Services unconsolidated venture for approximately $27 million reflects a strategic shift in its investment portfolio, potentially reallocating resources to core operations or other growth opportunities. This move may resonate positively with investors seeking a more focused business strategy, particularly in the senior living industry, which is undergoing significant changes due to demographic shifts and evolving consumer preferences.

Furthermore, the anticipated financing transaction involving eleven unencumbered owned communities suggests an active management approach to asset utilization and capital structure optimization. This could signal to the market that Brookdale is proactively seeking to leverage its real estate assets to strengthen its financial position, which may be a point of interest for real estate and healthcare sector investors.

Overall, these developments could be indicative of a broader industry trend where senior living providers are increasingly looking to streamline operations and maximize asset value amidst a competitive landscape.

Economist

Brookdale's financial maneuvers occur within the context of a broader economic environment characterized by interest rate fluctuations and a potential shift in the real estate market. The fixed interest rate of the new debt positions Brookdale advantageously in the event of rising interest rates, which is a pertinent concern for businesses with significant real estate holdings and debt financing needs. This proactive approach to debt management may serve as a hedge against future economic uncertainties.

Additionally, the ability to extend the maturity of the revolving credit facility to as late as 2029 offers considerable leeway in navigating economic cycles. The conditions for these extensions, while not specified, are likely to include financial covenants that could influence the company's operational strategy. The impact of these financial strategies on Brookdale's performance should be evaluated in the context of economic indicators such as housing market trends, consumer spending power in the senior living sector and overall economic growth, which can affect the company's revenue streams and asset valuations.

NASHVILLE, Tenn., Dec. 27, 2023 /PRNewswire/ -- Brookdale Senior Living Inc. (NYSE: BKD) ("Brookdale" or "the Company") announced today that the Company has recently completed two financing transactions, which refinanced all of its remaining 2024 debt maturities. After giving effect to these transactions, the Company's next debt maturity without extension options is September 2025.

The Company has also made significant progress on a financing transaction involving eleven of its currently unencumbered owned communities, which it expects to complete in the coming months.

Additionally, in December 2023, the Company sold its remaining 20% equity interest in its Health Care Services unconsolidated venture and received aggregate proceeds of approximately $27 million in connection with the transaction. The Company previously decreased this investment upon a sale of a portion of the venture in November 2021.

"We believe the positive strides we have made in 2023 are reflected in these completed financing transactions, which clear our debt maturities until 2025. The ongoing proactive management of our liquidity position, including these completed and pending transactions, together with Brookdale's solid improvement in operating results, support our continued strong liquidity position," said Dawn Kussow, Brookdale's Executive Vice President and CFO. "We appreciate Fannie Mae and JLL for their ongoing partnership on this financing, and Capital One for their partnership on the amended credit agreement."

Recently Completed Financing Transactions
In December 2023, Brookdale obtained a $180 million loan under its Master Credit Facility Agreement, dated as of August 31, 2017. The financing with Jones Lang LaSalle Multifamily, LLC was obtained pursuant to Fannie Mae's DUS Program. The principal amount of the new debt is secured by non-recourse first mortgages on 47 communities, which also continue to secure approximately $580 million of additional outstanding mortgages with a later maturity. The $180 million loan bears interest at a fixed rate of 5.97% and matures in 2031. The facility includes certain "borrow-up" provisions, which the Company expects will enable it to obtain additional funding in 2024 under the loan based on the performance of the underlying communities. At the closing, the Company repaid $260 million of debt under the facility, which was scheduled to mature in 2024, using proceeds from the $180 million loan and cash on hand.

In December 2023, the Company also amended its revolving credit agreement with Capital One, National Association, as administrative agent and lender and the other lenders from time to time parties thereto. The amended agreement provides an expanded commitment of up to $100 million which can be drawn in cash or as letters of credit and represents a $20 million increase from the previously existing commitment. Available capacity under the facility will vary from time to time based upon certain calculations related to the appraised value and performance of the communities securing the credit facility and the variable interest rate of the credit facility. The amended credit facility matures in January 2027, and the Company has options to extend the facility to March 2028 and March 2029 subject to the satisfaction of certain conditions. Amounts drawn under the facility bear interest at SOFR plus an applicable margin. The applicable margin varies based on the percentage of the total commitment drawn, with a 2.50% margin at utilization equal to or lower than 50% and a 3.00% margin at utilization greater than 50%.

ABOUT BROOKDALE SENIOR LIVING
Brookdale Senior Living Inc. is the nation's premier operator of senior living communities. The Company is committed to its mission of enriching the lives of the people it serves with compassion, respect, excellence, and integrity. The Company, through its affiliates, operates independent living, assisted living, memory care, and continuing care retirement communities. Through its comprehensive network, Brookdale helps to provide seniors with care, connection, and services in an environment that feels like home. The Company's expertise in healthcare, hospitality, and real estate provides residents with opportunities to improve wellness, pursue passions, make new friends, and stay connected with loved ones. Brookdale, through its affiliates, operates and manages 672 communities in 41 states as of September 30, 2023, with the ability to serve more than 60,000 residents. Brookdale's stock trades on the New York Stock Exchange under the ticker symbol BKD. For more information, visit brookdale.com or connect with Brookdale on Facebook or YouTube.

SAFE HARBOR
Certain statements in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to various risks and uncertainties and include all statements that are not historical statements of fact and those regarding the Company's intent, belief or expectations. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "could," "would," "potential," "intend," "expect," "endeavor," "seek," "anticipate," "estimate," "believe," "project," "predict," "continue," "plan," "target," or other similar words or expressions, and include statements regarding pending transactions and other future events. These forward-looking statements are based on certain assumptions and expectations, and the Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although the Company believes that expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its assumptions or expectations will be attained and actual results and performance could differ materially from those projected. Factors which could have a material adverse effect on the Company's operations and future prospects or which could cause events or circumstances to differ from the forward-looking statements include, but are not limited to, the Company's ability to complete pending or expected transactions on agreed upon terms or at all, including in respect of the satisfaction of closing conditions, and uncertainties as to the timing of closing; disruptions in the financial markets or decreases in the appraised values or performance of the Company's communities that affect the Company's ability to obtain financing or extend or refinance debt as it matures and the Company's financing costs; the Company's ability to obtain additional capital on terms acceptable to it; as well as other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission, including those set forth in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in such SEC filings. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect management's views as of the date of this press release. The Company cannot guarantee future results, levels of activity, performance or achievements, and, except as required by law, it expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained in this press release to reflect any change in the Company's expectations with regard thereto or change in events, conditions, or circumstances on which any statement is based.

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SOURCE Brookdale Senior Living Inc.

FAQ

What financing transactions has Brookdale Senior Living Inc. (BKD) recently completed?

Brookdale completed a $180 million loan under its Master Credit Facility Agreement and amended its revolving credit agreement with Capital One, National Association.

How did Brookdale Senior Living Inc. (BKD) clear its debt maturities until 2025?

Brookdale refinanced all of its remaining 2024 debt maturities through the completed financing transactions.

What did Brookdale Senior Living Inc. (BKD) do with its remaining 20% equity interest in its Health Care Services unconsolidated venture?

The company sold its remaining 20% equity interest and received aggregate proceeds of approximately $27 million.