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Completes initial phase of debt restructuring covering 49 assets financed by Fannie Mae and Ally Bank
Fannie Mae agreement will result in approximately $40 million of additional free cash flow over the next three years
Conversant Capital, Sonida’s largest shareholder, provides $13.5 million equity commitment, available to Sonida at its option over 18 months
Sonida Senior Living, a leading owner-operator of communities and services for seniors, announced several steps the Company has taken to enhance its financial position and strategic capabilities.
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“We are pleased to support Sonida during this pivotal time and to facilitate this important step to secure the Company’s balance sheet with additional equity capital”
On June 29, 2023, Sonida entered into a comprehensive forbearance agreement with Fannie Mae as the first of a two-step process to modify all existing mortgage agreements with Fannie Mae by the end of Q3 2023. In the second step, Sonida and Fannie Mae have agreed to exercise commercially reasonable efforts to enter into a loan modification agreement for each of their existing mortgage agreements on or before September 30, 2023. The terms of the proposed loan modification are set out in an agreed upon term sheet contained in the forbearance agreement and are subject to certain conditions customary for a transaction of this nature, as set forth in the forbearance agreement. The forbearance and subsequent loan modification provide the Company with additional financial flexibility to build on its strong operational momentum and pursue its strategic growth plan. Ironhound Management acted as an advisor to the Company in its discussions with Fannie Mae.
Additionally, the Company secured a $13.5 million equity commitment, available in part or in whole at the Company’s sole discretion for 18 months, from Conversant Capital, the Company’s largest shareholder, and modified the covenants on its loan with Ally Bank.
Under the Fannie forbearance agreement and beginning with the June 2023 payments, Sonida will make reduced debt service payments in contemplation of the loan modification terms and will continue to do so through the forbearance period. In addition, and in consideration for the forbearance, Sonida made a $5.0 million payment to be applied against the existing loan balances in conjunction with the execution of the forbearance agreement.
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Key elements of the subsequent loan modification will include:
- All maturities will be extended to December 2026 or beyond.
- All contractually required principal payments under the 37 Fannie Mae loans will be deferred for three years or waived until maturity, resulting in $33.0 million of cash savings through maturity.
- Sonida will receive near-term interest rate reduction on all 37 assets, resulting in $6.1 million in cash interest savings over the next 12 months.
- The Company expects the loan modification to be finalized by September 30, 2023, per the terms of the forbearance agreement.
- In consideration for the loan modification, Sonida will provide a second $5.0 million payment on June 1, 2024, to be applied against the existing loan balances.
In connection with the completion of the Fannie Mae forbearance and the Conversant equity commitment, Ally Bank has agreed to temporarily reduce the minimum liquidity requirement under its $88.1 million facility for 18 months subject to certain conditions that the Company expects to meet.
Conversant Capital has committed to purchase up to $13.5 million of common equity at $10 per share, a 30% premium to the stock’s 30-day volume weighted average price, over the next 18 months. Sonida shall have the right, but not the obligation, to utilize Conversant’s equity commitment and may draw on the commitment in whole or in part. The Company intends to draw $6.0 million in July, in conjunction with the first $5.0 million principal payment to Fannie Mae. The remaining funds may be drawn as needed for general working capital needs or to fund the second $5.0 million loan paydown to Fannie Mae.
“We appreciate the collaborative approach from our lending partners to make these commercially compelling modifications to our debt structure,” said Brandon Ribar, President and CEO of Sonida Senior Living. “These developments provide the Company with greater financial flexibility and runway to continue delivering operational improvement while providing the balance sheet capacity to pursue attractive growth opportunities, including both asset acquisitions and third-party management contracts.”
“We are pleased to support Sonida during this pivotal time and to facilitate this important step to secure the Company’s balance sheet with additional equity capital,” said Michael Simanovsky, Founder and Managing Partner of Conversant. “We believe that the current environment offers a compelling opportunity for Sonida, and we look forward to working with the Company and its world-class executive team to capitalize on the extremely attractive demographic and industry trends we see in senior housing to deliver value for residents, team members, the communities we operate and investors.”
The Company is in discussions with Protective Life Insurance Company in an attempt to resolve its non-compliance on certain non-recourse mortgage loan agreements totaling $72.1 million for four of the Company’s communities.
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