HJ Sims secures $38.7 million of Hybrid Bank Financing Combining $28.7 million Tax-Exempt Direct Bank Loan Renewal and $10.0 million Taxable Revolving Line of Credit for New Capital
“White Horse Village recently closed a combination $38.7 million bank debt renewal and line of credit financing, which included a conversion from LIBOR to SOFR. We found HJ Sims guidance throughout the process to be invaluable. This transaction is part of a multi-phase financing that includes the financing of our forthcoming Master Plan. The current economic environment combining inflation and escalating interest rates is not easy to navigate, and the trust we placed in HJ sims to guide us through the process proved well-deserved. HJ Sims is many things and among the qualities they possess are stellar communication skills, obvious technical knowledge that is tailored to the audience, and the ability to build relationships with all interested parties, including banks, accounting firms and bond issuing authorities. White Horse Village is pleased with the outcome of the initial phase and we look forward to continuing our relationship with HJ Sims, including Jim Bodine and Siamac Afshar, as we gear up for the next phase of the engagement.”
— Mark Wasserman, Chief Financial Officer, White Horse Village
White Horse Village (WHV) is a strong performing single site Life Plan Community with 331 Independent Living Units, 48 Personal Care Units, 20 Memory Care Units and 59 Skilled Nursing Beds. It’s located on 97 acres, adjacent to Ridley Creek State Park, in Edgmont, PA about 20 miles west of Center City Philadelphia. HJ Sims was engaged, in late 2020, to assist with planning, structuring and financing related to a multi-component Master Plan Project which is currently being formulated.
With that plan taking shape, HJ Sims provided input on various matters including assessing WHV’s capital needs and timing, financing-project capacity, plan of finance options and consideration of WHV’s outstanding debt – bank debt with a put provision in 2023. With the upcoming put, anticipated Master Plan capital needs and continuing volatility in financing markets, HJ Sims recommended that WHV pursue the debt renewal well in advance of the December 2023 put date along with seeking a component of new financing to fund initial capital needs away from cash flow/equity that WHV may choose to commit to the first set of master plan projects – and to do so before year-end 2022.
With regard to the existing debt and upcoming put, HJ Sims and WHV evaluated two options: i) a renewal of the existing debt and retention of existing interest rate swaps and ii) a full refinancing and termination of its “legacy” swaps with unrelated counterparties. Considering both financial implications as well as the existing covenants and other terms of the existing debt, WHV opted to proceed with a renewal. With this direction, HJ Sims formulated a financing request from WHV’s existing bank, Citizens Bank, seeking renewal of existing debt together with interim financing for near-term capital needs via a line of credit. Key elements of the request for proposal included: i) an extended tenor (put date) of 14 years, equaling the remaining maturity and thereby, removing renewal risk on the existing Bank Debt, ii) multiple options related to maturity and structure of the line of credit along with iii) a request for reduction in several covenant thresholds related to ongoing financial covenants as well as future additional debt incurrence.
Citizens provided an attractive proposal, responsive to the RFP. This included: i) a 14-year tenor, matching the existing maturity, ii) a 3-year maturity, with a revolving feature, on the Line of Credit and iii) reductions in Debt Service Coverage and Liquidity thresholds, both for ongoing covenants as well as for additional capital financing. Additionally, with the ongoing transition from LIBOR, the proposal reflected use of SOFR, the most commonly used replacement interest rate index.
HJ Sims and Citizens worked with WHV and the financing team to advance the financing expeditiously. This also included work related to the LIBOR-SOFR interest rate transition and conforming the new SOFR index on the renewed debt to the interest rate indices on the existing interest rate swaps – three existing “legacy” LIBOR-based interest rate swaps, that relate to the existing debt and will remain in place independent of the renewal. Modifications to the interest rate indices were scheduled to be completed in the weeks following financing closing.
In sum, with HJ Sims leadership and the collaboration of Citizens and financing working group, WHV successfully completed it desired modified and expanded bank financing, combining the $28.7 million Tax-Exempt Direct Bank Loan renewal with a $10.0 million Taxable Revolving Line of Credit. The transaction was completed in mid-September 2022, well in advance of year-end and the December 2023 put date. WHV is well-positioned to continue work on its Master Plan and related financing with an attractive existing capital structure in place together with access to external capital to fund any early stage projects, as desired.
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