HJ Sims Assists Elwyn Secure Replacement $45 million Taxable Credit Facility
“We were fortunate to have Jim Bodine and Siamac Afshar to shepherd us through the refinancing of our short-term line of credit in FY 2020. This transaction represented a major turning point for Elwyn, the oldest non-profit organization of its kind. Moreover, our partners at HJ Sims facilitated the process during a 100-year pandemic, under extraordinary circumstances. The team was professional, experienced, and highly competent. Exactly what we needed, precisely when we needed it. We will continue to use HJ Sims for similar activity in the future, post turnaround, as we return to strategic planning and growth.“
– Charles McLister, Chief Executive Officer, Elwyn
Founded in 1852, Elwyn is one of the oldest, largest and most diverse not-for-profit providers of support, treatment and education to children and adults with intellectual and developmental disabilities, autism and related behavioral health issues in the U.S. It serves individuals ranging from children, adolescents and adults, including Pre-K to Seniors. Elwyn is a pioneer in the disabilities field, developing new models of care, practices and support traditions across its 165-year history.
Elwyn provides highly specialized and essential services to its constituents – including Education & Supplementary “Wrap-Around” Services, Residential and Community-based Treatment and Support Services, as well as Vocational Training/Supported Employment. It operates at a significant scale, generating approximately $400 million in annual revenue and operating 20 major programs in nine states (California, Delaware, New Jersey, Pennsylvania, Rhode Island, Maine, Massachusetts, North Carolina, and Virginia). Elwyn services 20,000 individuals and employs over 3,500.
HJ Sims was engaged by Elwyn in the fall of 2020 to assist in identifying and implementing a replacement Credit Facility (combining a Line of Credit, as well as Letters of Credit) and an anticipated new commercial banking relationship.
In late 2020, Elwyn was in the advanced stages of executing an operating and financial turn-around plan, undertaken following the hiring of a new CEO, who succeeded a long-tenured predecessor. Among the issues being addressed were: i) a shift in reimbursement methodology in a major program along with overall enhanced revenue cycle management organization-wide, including both modernization of finance and information technology systems, ii) integration of a recently-completed acquisition that substantially expanded Elwyn’s behavioral services, iii) evaluation of programs and selective discontinuation of those having smaller scale/lower profitability, and iv) evaluation of substantial real estate holdings, both developed and undeveloped, prioritization and selective monetization of non-core holdings. While these initiatives were commenced prior to the outbreak of COVID-19, Elwyn continued this transition despite facing significant pandemic-related challenges; like all human services providers, this included reduced/shifted programming and challenged staffing availability. Despite this, Elwyn effectively continued the transition, resulting in improved profitability along with significant increases in cash flow. Cash flow was applied to build liquidity along with a significant pay-down on its outstanding line of credit. With this as background, HJ Sims worked with Elwyn and its strategic/financial advisor, to assess opportunities for a replacement credit facility reflective of Elwyn’s improved operating and financial profile.
HJ Sims conducted a comprehensive bank solicitation seeking a $45 million Taxable Credit Facility, comprised of a $30 million Line of Credit (General Corporate Purposes/Working Capital) as well as Letters of Credit for up to $15 million (supporting multiple Self-Insurance Programs). The facility is secured by a pledge of Gross Revenues and a Mortgage on Elwyn’s main campus in Media, PA on parity with Elwyn’s $56 million of outstanding Tax-Exempt Bonds and Tax-Exempt/Taxable Bank Debt.
The bank solicitation was well-received with Elwyn receiving proposals from four commercial banks. Elwyn ultimately opted to combine participation of two new banking partners, with Key Bank providing up to $30 million and Bank United providing up to $15 million, aggregating to the $45 million total financing request. Among the highlights of the new facility are: i) interest rate denominated in SOFR (“Secured Overnight Funding Rate”) reflective of the upcoming transition from LIBOR as the industry benchmark interest rate, ii) competitive interest rate pricing along with up-front and ongoing fees, iii) integration with Elwyn’s outstanding long-term debt related to debt security and covenants and iv) expedited closing.
Closing on June 30, 2021 (2021 fiscal year end), the $45 million financing vehicle represents an attractive replacement to Elwyn’s prior credit facility. Among other attributes, the new facility provides Elwyn with a reduced loan credit spread by approximately 75 bps along with providing liberalized reporting covenants. The financing vehicle also serves as an initial step in Elwyn’s transition in establishing commercial banking relationships with both Key Bank and Bank United. HJ Sims was honored to play a role in this important next chapter for Elwyn, resuming a banking relationship with one of HJ Sims’ bankers that spans almost 30 years.
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