Municipal bonds to senior living communities were among the most delinquent in the first quarter of 2022, according to an April 15 report by Moody’s Investors Service.
The reason, according to the bond credit rating company, is that the senior living was “most directly harmed by the pandemic.”
For the report, Moody’s Investors Service looked at the sector’s performance since the beginning of the pandemic through the first quarter of this year. Most of the 83 “material credit events” reported by municipal bond issuers in the first quarter of 2022 remained concentrated among small, unrated borrowers, particularly senior living facilities and special districts such as tax increment financing districts.
“With nearly 50 senior living facility bond delinquencies recorded over the past two years (all unrated), we conclude senior living was the most poorly positioned sector to withstand the pandemic,” according to the report. Reduced occupancy and increased expenses “pushed into delinquency numerous senior living borrowers that had previously, if only barely, kept their heads above water.”
Moody’s looked at Electronic Municipal Market Access disclosures in the principal/interest payment delinquency and non-payment related default categories senior living municipal bonds. They found 675 bond delinquencies and default events, representing 24% of municipal bond delinquencies.
A disclosure is considered to be a material credit event if it is filed in one of the following EMMA categories:
- Bankruptcy, insolvency, receivership or similar event
- Financial obligation — event reflecting financial difficulties
- Non-payment-related default
- Principal/interest payment delinquency
- Unscheduled draw on credit enhancement reflecting financial difficulties
- Unscheduled draw on debt service reserve reflecting financial difficulties
At least 29 senior living financings missed municipal bond payments for the first time during the pandemic. Six senior living financings (all unrated) with a total of $1.46 billion debt outstanding whose payment delinquencies were directly attributable to the pandemic, according to Moody’s. The report found nine senior living financings (all unrated) with a total of $365.1 million debt outstanding that missed bond payments for the first time during the pandemic but had appeared likely to default anyway.
Moody’s found six projects with $590.9 million of outstanding debt that were already delinquent before the pandemic began, “meaning their delinquencies cannot be attributed to the pandemic.”
