Closing transactions amid the COVID-19 pandemic has required some innovative financing strategies to create operational cash flow for senior living and care organizations, according to a white paper released last week by investment banking firm HJ Sims.

In particular, the Fairfield, CT-based firm pointed to the use of Cinderella bank-held bonds, taxable fixed-rate advance refundings and forward refundings as the most advantageous results for its clients last year. 

For example, the firm applied a bank-placed Cinderella bond to the refinancing of outstanding fixed rate bonds at Marshes of Skidaway Island, an assisted living, skilled nursing and rehab facility in Georgia, noting that the strategy would provide significant savings. Sims successfully closed the $47.1 million financing in December, saving approximately $1.14 million annually and $15.36 million, in the aggregate, through a bank financing.

Westminster Communities of Florida, the largest provider of life plan communities in the state of Florida, employed Sims to use a taxable fixed rate advance refunding of bonds issues to acquire the St. Augustine, FL, retirement community Glenmoor after its successful turnaround. Sims analyzed bank-held and fixed rate bond advance refundings, with a rapidly growing taxable fixed rate bond market. In the end, Westminster proceeded with a taxable advanced refunding and tax-exempt new money issuance to fund upcoming capital projects, and Sims procured strong investor interest in the successful $107.4 million transaction.

The company also used a forward refunding approach with Peconic Landing, a continuing care retirement community in Greenport, NY. This strategy uses tax-exempt fixed rate bonds priced on a present-day basis but not delivered and “closed” until 90 days before the call date of the refunded bonds.

Discussions about potentially refunding Peconic’s bonds began in 2019, but the elimination of tax-exempt advance refundings meant that immediate access to the tax-exempt market wasn’t possible, and Peconic’s current BBB- rating made access to the taxable bond market impractical. Instead, Sims secured pricing on a 20-year term on the refunding in late 2019, saving Peconic more than $300,000 in annual debt service with the ultimate settlement occurring in November amid the COVID-19 pandemic.