The coronavirus is pushing more continuing care retirement communities into financial upheaval and putting pressure on the municipal bonds that financed them, according to an article Wednesday in Bloomberg Law.
Some communities, unable to accept new occupants amidst COVID-19 restrictions, are using stimulus loans to make payroll, drawing in debt service reserves to make interest payments and even asking bondholders to forgo interest payments for the next year, the article reports.
Since the beginning of March, at least five retirement communities have missed a debt payment, drawn on reserves or violated bond covenants, according to data compiled by Bloomberg. At least one assisted living community and one nursing home operator have missed debt payments. Although most CCRCs (also known as life plan communities) house seniors who live by themselves and need less care — thus avoiding the heavy outbreaks seen in skilled nursing and assisted living — they’re still grappling with higher costs to protect patients and an inability to generate revenue through new admissions.
The CCRCs most likely to face major financial stress from the pandemic are those that were struggling even before the virus, Louis Robichaux, a senior managing director at Ankura Consulting Group, told Bloomberg Law. Older facilities facing increased competition, and those with a larger percentage of assisted living, memory care and skilled nursing units are most at risk, he said.
“It’s not my sense there are hundreds of communities on the bubble, but there are some,” Robichaux said. “Bondholders may find themselves without many attractive options other than to negotiate the best forbearance arrangements possible, and ride this out.”