The Situation
In 2012, a not-for-profit senior living provider located in the Midwest restructured its debt, the result of which was a series of loans using both a senior and subordinated debt structure. After several years of improvement led by solid ramp-up in occupancy, the community found that its ability to pursue future strategic initiates was blocked by the outstanding subordinated debt (“Hope Notes”). The Hope Notes were originally designed to capture a portion of future excess cash flow for the old lenders, and as a result suppressed the community’s ability to develop an important phase 2 expansion project, and its ability to transfer needed funds to the sponsoring organization.
The Hamlin Solution
Hamlin Capital Advisors, working through an underwriter, identified a new specialized lender as a potential source of refinancing for the Hope Notes, and the community contacted the subordinated lenders to discuss an exit financing. Subsequent discussions led to an agreement, that resulted in successful refunding of the Hope Notes via new senior & subordinated bonds purchased by the new lender at a substantial discount. Hamlin Capital Advisors, LLC served as the financial advisor.
The community was able to escape the onerous restrictions imposed by the Hope Notes, and as its financial profile continues to improve, will allow monies to flow from the community to its parent in support of its 501(c)3 mission.
