In these unprecedented times, healthcare lenders and their borrowers and operators in the skilled nursing facility space must work hand-in-hand to ensure long-term financial stability, Kenneth J. Ottaviano, a partner and finance lawyer at Blank Rome LLP, told McKnight’s Friday.
Ottaviano noted that although lenders cannot control whether an operator is being forced by federal or state officials to accept people with COVID-19, or whether there are current cases of COVID-19 in the facility, they can control the flow of funds to their borrowers and help ensure that operators have enough liquidity to manage the significant healthcare issues that they are dealing with on an hourly basis.
He also pointed to the numerous governmental programs infusing capital into the sector, including the Payroll Protection Program and the expanded Accelerated and Advance Payment Program. Although both programs provide immediate cash infusions, they each have very different financial effects and require lenders to provide some modifications and covenant relief to underlying loan agreements, and in most cases, consent.
In addition to these government programs, Ottaviano also pointed to ways that some healthcare lenders are assisting borrowers during the pandemic. One example is agreeing to defer principal and interest payments for 60 to 90 days.
“It is generally understood that in the short term, both healthcare lenders and borrowers/operators need to put resident care first and deal with the debt load and loan restructuring down the road,” Ottaviano said.