HJ Sims Successfully Completes $25.1 Million Cinderella Refinancing with 15-year Bank Commitment
“We were very blessed to have worked with Jim Bodine and Siamac Afshar on the recent bond refinancing for Fellowship Community. Their expertise and advice were invaluable. They proactively brought options for refinancing to us for consideration. Once the decision was made to move forward, Jim & Siamac deftly guided the process, answered multiple questions, and prepared Board of Director’s presentations. They coordinated all the moving parts and the diverse group of professionals that made up the refinancing team to a very successful conclusion. We believed that they looked out for our best interest and tried to position the organization for maximum benefit. They made a very complex financial transaction easy to understand and explain. We would be very happy to work with the HJ Sims team in the future, are thankful for the work Jim & Siamac did on our behalf and would highly recommend them to others.”
– Mary Kay McMahon, President & Chief Executive Officer, Bible Fellowship Community
Bible Fellowship Community (“BF” or the “Community”) is a not-for-profit life plan community, located on 46 rural acres in Whitehall, Pennsylvania and has been serving seniors for over 30 years. The Community offers a full continuum of services and care in a campus-based residential setting with a current complement of 151 ILUs, 94 PCUs and 65 SNF units. This includes a campus expansion project comprised of 35 new personal care units and 34 new independent living units together with additional capital improvements completed in 2014.
With interest rates at record lows in 2020-early 2021 and an approaching optional call date of July 1, 2022 on BF’s Series 2013 Bonds, HJ Sims recognized the opportunity for BF to realize significant debt service savings via a refinancing. Given the prohibition on tax-exempt advance refunding resulting from changes in the federal tax law in 2017, HJ Sims worked with BF to consider a range of creative alternative refinancing options.
HJ Sims evaluated multiple approaches to refinancing and locking-in the savings – these included: 1) publicly issued Forward Delivery Bonds, 2) a forward closing fixed-rate Bank Financing and 3) Cinderella Bank Refinancing along with the optimum timing to undertake the refinancing. Additionally, for the two bank refinancing options, HJ Sims assisted BF with evaluation of bank partners and strategy for securing a competitive proposal considering not only interest rate pricing and fees, but also covenants and terms providing BF with desired long-term operating, financial and strategic flexibility. Ultimately, BF opted to pursue a bank refinancing, intended as a forward closing fixed-rate Bank Loan, and to work with its existing bank partner, Truist (the “Bank”).
As BF had previously financed via publicly-offered fixed rate Bond debt, HJ Sims led a multi-step education process for the BF Board and Finance Committee related to the use of bank-sourced refinancing, both on a Forward and a Cinderella refinancing basis, appearing before both the Finance Committee and the full Board on multiple occasions. Additionally, HJ Sims organized and worked with the financing team, including Truist, Bank Counsel, Bond and Borrower’s Counsel to assess both bank refinancing options. This resulted in a shift from the initially-planned Forward refinancing option to a Cinderella refinancing approach along with the decision to fix the interest rate on both the initial taxable portion of debt together with the forward permanent tax-exempt debt. Further, HJ Sims and the financing team worked to synchronize the Bank’s security and covenant requirements with the existing Master Trust Indenture to seamlessly transition the refinancing from taxable to tax-exempt mode upon its conversion date, as well as build in future flexibility for additional capital expenditure and potential financing, among other provisions.
HJ Sims led the financing implementation process and served as Swap Advisor, parallel-tracking completion of conditions precedent, transaction documentation and approval, to successfully complete the financing.
The $25.1 million financing closed on December 2nd, 2021 as a Cinderella bank refinancing with Truist with a 15-year credit commitment. The proceeds were used to refinance the outstanding Series 2013 Bonds, initially in a taxable mode, converting to tax-exempt on April 3, 2022, the earliest date upon which BF would have been eligible for a current refunding. The total financing was undertaken at an underlying SOFR-based variable rate and BF elected to hedge the underlying floating rate with floating-to-fixed interest rate swap(s), entering into a current starting swap for the taxable portion and forward starting, tax-exempt swap to become effective upon the conversion date, with both also based on SOFR.
The refinancing was completed amidst near historic lows in borrowing rates, resulting in total debt service savings of $9.4 million ($6.9 million NPV) or 25.8% of par refunded, reducing annual debt service by approximately $450,000.
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