Fueled by losses brought on by the COVID-19 pandemic, more senior living and care community owners are defaulting on municipal bonds more than ever before. At the same time, however, investors stand ready and willing to buy up municipal debt sold off from the industry, according to a recent report.

Among all sectors, long-term care borrowers accounted for 33 of 64 first-time payment defaults last year by number, $1.7 billion of the $2.9 billion total by par, according to data released Monday from Municipal Market Analytics. Almost 8% of the $41 billion in outstanding long-term care-related bonds were in default as of Jan. 1. That compares with 7% a year ago and more than double the sector’s default rate of 3.2% on Jan. 1, 2018.

The 33 first-time payment defaults were a record for the sector; the previous record was 31, in 2020. The $1.7 billion of par defaulting represented 4.3% of all outstanding sector par as of Jan. 1, 2020, according to the MMA report, which is “a record annual default performance for any major credit  sector.” 

The firm includes independent living, assisted living, skilled nursing, memory care under the umbrella of senior living or retirement bonds, MMA partner Matt Fabian told the McKnight’s Business Daily.

”High investor demand has helped prop up struggling facilities by providing access to rescue cash,” Fabian told the Wall Street Journal.

Investors appear to be looking beyond the short-term effects of COVID-19. Despite the “temporary disruption” from the pandemic, market conditions are favorable for investing in senior living and care, Kurt Read, chair of the National Investment Center for Seniors Housing & Care Board of Directors and managing director of RSF Partners, said in November at the organization’s Fall Conference.

“The risky debt is a welcome addition for many high-yield funds trying to put investor cash to work,” the Wall Street Journal reported.

Independent living, assisted living, nursing home and continuing care retirement community-related deals were “well-received with strong investor interest,” Jon Barasch, director of municipal evaluations at ICE Data Services, told the news outlet.