It’s convenient to blame many of the senior living sector’s debt woes on the coronavirus. Convenient, but not entirely accurate.
Truth be told, more than a few operators were mired in fiscal nightmares well before the COVID-19 wrecking ball arrived. These firms never were likely to catch up, and they continue on largely because of creditor benevolence.
I’m referring, of course, to the senior living zombie companies in our midst. And by all indications, they are growing in number.
We can thank Japanese bankers for this exotic import. For rather than recognize losses following the collapse of the Japanese economy in the 1990s, they kept lending money to troubled companies. The result was decades-long economic stagnation.
Here in America, many lenders are extending similar support to more than a few senior living organizations. And in some ways, the Federal Reserve may be making things even worse. For in its efforts to reduce the overall fiscal damage of COVID-19, they are making it much easier for zombie companies to procure additional funds.
Turning on the money spigots might be a good short-term strategy for the overall economy. But it also can prolong the agony for walking dead firms. To be sure, senior living hardly has a monopoly here. According to Deutsche Bank Securities, 20% of all publicly traded companies in the United States are zombies.
But senior living zombie firms are hampered in ways that harm them – and the customers they serve. By essentially always being in survival mode, these firms are ill-equipped to take steps that are necessary to thrive in a competitive economy. That includes actions such as innovating care and services, creating perks that attract and retain top talent, and improving the overall experience for customers. And that’s just for starters.
Makes you wonder whether the zombie companies in this sector might be better off dead.