Don’t you love it when a plan finally comes together? Sonida Senior Living has been working diligently to streamline its capital structure, not to mention improving its census and margins. Yesterday they announced two major developments which should set the stage for future growth.
First, they purchased $77.4 million of outstanding debt held by Protective Life for $40.2 million, or a 52% discount, across seven communities. We are not sure we have seen that large of a discount in the market, and perhaps news of this will light a fire under some other creditors. Part of the purchase price was funded by a $24.8 million expansion of Sonida’s existing term loan with Ally Bank. An additional $44 million of former Protective Life debt had been previously sold by Protective, and Sonida has talked with the new investors. These loans are not a worry.
With other cash raised for the debt payoff, Sonida’s total debt has been reduced by $52.6 million, and annual debt service reduced by $3.2 million. This is progress. There is just $31.8 million of debt maturing before the end of 2026, when interest rates should be much lower than today.
In the second piece of the capital structure improvement, Sonida completed a $47.75 million private placement of equity with its majority shareholder, Conversant Capital. Priced at $9.50 per share, or a 5% premium to the 30-day weighted average price, the deal came in two tranches. One was $32 million and closed on February 1, and the second tranche of $16 million will close at the end of the first quarter.
The approximately $32 million of cash left over after the debt restructuring will be used to convert existing units into memory care, and expand some communities that are highly occupied, leaving about $25 million for acquisitions and working capital. They are already in advanced talks to buy a four-community portfolio, with three of the communities expanding the company’s footprint in Texas, and the fourth in Georgia.
The news sent Sonida’s shares soaring by 27% before settling a little. The company is now ready to start growing, can nearly double in size without much added to G&A, and plans to take advantage of what could be a very active selling market this year.
