The owners of a continuing care retirement community on Long Island have filed for pre-negotiated Chapter 11 bankruptcy protection for the second time in seven years, as it looks to restructure $199.5 million in bond debt.
The CCRC, The Amsterdam at Harborside in Port Washington, New York, cited struggles to attract new residents, which were exacerbated by the coronavirus pandemic, as the impetus for the filing, and hopes the latest debt restructuring will allow the organization to pay vendors, and avoid layoffs and cuts to resident services.
Additionally, The Amsterdam at Harborside has $179 million in general unsecured debt and an outstanding Paycheck Protection Program loan worth $1.15 million.
The entrance fee-based community opened in 2010, but struggled with a sluggish real estate market following the 2008 financial crisis, as homeowners intending to use the proceeds from housing sales to finance a move to The Amsterdam were unable to afford entrance fees.
The Amsterdam previously filed for bankruptcy in July 2014, with a pre-negotiated plan in place to restructure $220 million in bond debt. The community exited bankruptcy in January 2015, having replaced the debt with new bonds it now seeks to refinance with the current filing.
The debt consists of three tranches of bonds issued in 2014 by the Nassau County Industrial Development Authority, according to a first-day declaration in the U.S. bankruptcy court in New York. In the declaration, CEO James Davis indicated that the community struggled to attract residents at a pace sufficient to handle debt service obligations.
The pandemic further impacted The Amsterdam’s struggles, and the community stopped payment on the bond debt, along with meting out entrance fee refunds. This put the community out of compliance with state law, as well as its own residency agreements.
The Amsterdam entered negotiations with bondholders which resulted in the latest agreement. Under the terms of the agreement, The Amsterdam will receive $40 million in new financing, as well as a commitment of $18 million in support from its corporate parent.
The plan will allow the community to issue new Series A bonds; exchange its existing bonds to debt holders for Series B bonds; fund the organization’s minimum liquid reserve requirements under New York State Department of Financial Services regulations; pay all outstanding resident entrance fee requirements in full; fund escrowed entrance fee refunds and establish a separate account dedicated to regulatory compliance and refund fee obligations, if needed in the future.
The agreement also assures there will be no layoffs, or disruption or elimination of resident services. Vendors will continue to be paid what they are owed, on time.
The capital infusion is a vote of confidence that The Amsterdam can turn around operations, from the financial institutions that hold the debt, Davis said in a statement provided to Senior Housing News.
“It’s important to recognize that we’ve developed this plan proactively by getting out in front of it and worked with our stakeholders to develop a viable solution.”
The performance of CCRCs has proven resilient during the pandemic, but some have struggled and filed for bankruptcy, after Covid-19 further strained operations and finances.
Park Place of Elmhurst, in the Chicago suburb of Elmhurst, Illinois, filed for Chapter 11 protection in December 2020 after defaulting on $15.5 million in bond debt issued by the Illinois Finance Authority.
Henry Ford Village, a CCRC in Dearborn, Michigan, is poised to exit bankruptcy after a court approved a $76.3 million acquisition bid by an affiliate of Sage Healthcare Partners. Henry Ford Village was also subject to a $69 million stalking horse bid by another bidder, MED Healthcare Partners in Hewlett, New York.
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