Presby’s Inspired Life Refinances Outstanding Series 2010 Bonds with $80.145 Million “BBB” Rated Bonds
“Presby’s Inspired Life’s obligated group, Philadelphia Presbytery Homes, Inc., has completed several financings with the help of HJ Sims. Our most recent 2017 bond issue, along with the refunding of our 2010 bonds and extinguishment of bank debt, was guided expertly by the HJ Sims team. This refinancing garnered us favorable interest rates, a lower maximum annual debt service, and additional funds for capital improvements. HJ Sims serves as a valuable resource for us and with their support we are better positioned for future construction projects. We are proud to include HJ Sims as a partner in our mission to provide exceptional living experiences for people age 62 and better.”
– Jennifer S. Kappen, Chief Financial Officer, Presby’s Inspired Life
Philadelphia Presbytery Homes and Services for the Aging (“PPHSA”), d/b/a Presby’s Inspired Life (“Presby”) is a regional leader in senior living in the greater Philadelphia area that has been serving the area since 1955. With communities in Montgomery County and Delaware County, Pennsylvania, Presby provides senior living services to seniors of all economic backgrounds. Philadelphia Presbytery Homes, Inc. (“PPHI”) owns and operates four market rate senior living communities, Rydal Park, Rosemont Presbyterian Village, Spring Mill Presbyterian Village, and Broomall Presbyterian Village, which compromise PPHI’s Obligated Group. These communities have a long history of providing services to seniors ranging from independent living accommodations to personal care to skilled nursing care. The Obligated Group currently provides senior living residences and services to over 859 residents and employs 714 team members. PPHI also provides comprehensive management services to all of the PPHI communities and other Presby subsidiaries. PPHI is Presby’s largest subsidiary. PPHI also manages 19 affordable housing communities that are sponsored by other entities.
Sims’ first financing for Presby dates back to 2009, when Sims secured $55 million in bank financing for a three-phased repositioning of its Rydal Park campus. In 2010, Sims served as Co-Manager on PPHI’s $40.3 million refinancing in conjunction with PPHI’s initial “BBB-” rating from Fitch. In 2013, Sims served as financial advisor to Presby on the extension of PPHI’s outstanding bank financing. In 2017, Sims served as Sole Manager on PPHI’s $88.145 million “BBB” (Fitch) rated fixed rate bond issue to refinance a portion of the Obligated Group’s outstanding debt and finance future capital improvements.
Despite a call date of December 1, 2021 on PPHI’s outstanding Series 2010 Bonds, Sims provided Presby with a refinancing analysis that demonstrated material cash flow savings given the current low interest rate environment even with the cost of the escrow through the call date. Sims analysis included matching and extending the maturity on the 2010 bonds. While Sims could generate greater annual cash flow savings by extending the maturity, Presby chose to match the maturity on its outstanding fixed rate bonds and maximize the net present value savings. In addition, the term on the 2013 bank bonds was up for renewal on 2020. Given an anticipated rise in short-term rates and the uncertainty of what the interest rate environment would be in 2020, Sims and Presby decided to take advantage of the current low interest rates and refinance the 2013 bonds with new long-term fixed rate bonds as well. For the bank debt, Sims analyzed wrapping the refinancing of the bank debt around the refinancing of the 2010 bonds and extending the maturity to 2048.
In addition, Presby had purchased land adjacent to its Rydal Park campus and is now planning to use this land for a new independent living project called Rydal Waters. Presby will need new capital to finance pre-development costs for Rydal Waters, so refinancing the outstanding bank debt freed up capacity among Presby’s strong existing bank relationships to finance the future Rydal Waters project. Additionally, Presby sought to maintain its “BBB” credit rating with Fitch and limit the effects of new debt against their debt service coverage.
Presby and Sims prepared a presentation describing the plan of finance to Fitch in August 2017. Fitch affirmed Presby’s “BBB” rating in September 2017 even with the anticipated future debt issuance for the Rydal Waters project given Presby’s strong financial profile, the anticipated savings generated from the refinancing and the elimination of the bank renewal risk. However, interest rates began to rise through the month of September, compromising the level of potential savings, and the Treasury Department reinstated the SLGS program. Sims accelerated the process of preparing the refinancing to enter the market and analyzed how to optimize the escrow with SLGS or open market securities. Sims also worked with Presby to facilitate discussion with its commercial bank partners to discuss relief from the unfavorable prepayment penalties on the outstanding bank debt.
Presby and Sims successfully accomplished the multitude of financing and refinancing objectives. The 2017 bonds eliminated Presby’s variable rate interest exposure, provided annual cash flow savings, boosted debt service coverage and leveled out and extended future debt service on a fixed rate basis. On the pricing day, Sims further improved the economics of the refinancing by helping to structure the refunding escrow with open market securities instead of SLGS.
Sims estimates the open market securities escrow reduced the cost of the financing by nearly $100,000. Finally, Sims worked successfully with Presby to negotiate a 1% reduction in the banks’ redemption premium and by refinancing the outstanding bank debt, preserved capacity from Presby’s commercial banking relationships to finance the future Rydal Waters project.
For more information on how Presby’s Inspired Life was Financed Right® by HJ Sims, please contact: