Ortelius Investors on Monday announced a counteroffer to Capital Senior Living’s (NYSE: CSU) plan to raise up to $153 million through a private placement of convertible stock to affiliates of Conversant Capital.
Ortelius, which has threatened to block the recapitalization since it was first announced in late July, also lined up a bridge loan for the Dallas-based operator at interest rates it believes are more favorable than those proposed by Conversant.
In a letter to stockholders, Ortelius Managing Partner Peter DeSorcy indicated he is willing to backstop an equity rights offering of up to $70 million, on the condition that it is decoupled from the other proposed transactions in the Capital-Conversant agreement.
Those other components include a $25 million accordion offered by Conversant, and an $82.5 million private placement of newly designated Class A convertible preferred stock.
Additionally, Ortelius received a non-binding term sheet from “an established, credit-focused asset management firm with more than $10 billion in capital” for a $46 million bridge loan for Capital, based on a review of publicly available information. The loan, should the company choose to accept, comes with interest rates and terms more favorable than those agreed upon in the Conversant deal.
“At this time, Capital Senior Living has received no alternative financing proposal at this time, from Ortelius or any other party,” a company spokesperson told Senior Housing News.
Ortelius, which controls shares equal to 12.7% of Capital’s common stock, indicated other stockholders are interested in participating in its counteroffer, and specifically named Caligan Partners, a New York City-based investment firm, in the letter.
“Our interactions with other investors lead us to believe that there is ample interest in a new rights offering which does not have the overhang of a priming security, punitive dilution and looming change-in-control of the business to Conversant,” DeSorcy wrote.
Ortelius’ counteroffer comes two weeks after Capital filed a definitive proxy statement with the Securities and Exchange Commission, setting an Oct. 12 vote on the preferred stock offering. The common stock rights offering launched on Sept. 10, and will expire at 5pm ET on Oct. 18, unless extended by the company.
Capital also previously addressed Ortelius’ attempts to block the recapitalization efforts, arguing that it did not have a viable and competing plan.
“[Ortelius] is engaged in a misguided campaign to solicit votes against the Transactions yet has not provided any path or vision to shareholders about how the company can survive (much less grow and thrive) in the absence of the Transactions,” Capital wrote in a letter to shareholders.
The company argues that the Conversant transaction provides the best path forward in its ability to remain a going concern.
Capital says it is in immediate need of $15 million in working capital, or else it would not have the funds to continue bankrolling occupancy and revenue recovery while simultaneously serving the terms of its outstanding debt.
The operator has $72 million of maturing mortgage debt with recourse provisions due in December 2021, and another $37 million of non-recourse mortgage debt maturing in April and May of 2022.
Additionally, Capital defaulted on $31.5 million in partial recourse mortgage debt held by Fifth Third Bank at the end of Q1 2021. The bank issued a notice of default letter indicating the loan is callable, and the two parties have been in discussions to resolve the issue.
The company and BBVA agreed to a one-year extension of a $40.5 million bridge loan set to expire on Dec. 10, 2021.
Capital Senior Living shares ended the regular trading day down nearly 9.2% at $29.06 per share.
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