Wed 07/07/2021 18:14 PM
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Editor’s Note: Reorg's coverage of American Eagle Delaware Holding Co. LLC is part of an expansion of our municipals-focused offerings. Please reach out to sales@reorg.com for more information. Read below as our Americas Municipals team provides an update on the Eagle Senior Living municipal bonds and click here to request a trial for access to the relevant documents below as well as our analysis and reporting on hundreds of other stressed, distressed and performing credits.

Relevant Documents:
Notice Forbearance Extension (March 9)
Financial Statement for Month Ending May 31
Notice of Asset Sale and Partial Redemption (Feb. 4)
Financial Statement for Year Ending Dec. 31, 2020
Notice of Forbearance Agreement (July 31, 2020)
Notice of Default (May 11, 2020)
Offering Memorandum

American Eagle Delaware Holding Co. LLC, operating as Eagle Senior Living, owns 15 independent living, assisted living and memory care facilities in seven states, including seven in Florida, according to its website. The senior living company has been in financial distress for some time, disclosing in its most recent monthly financial statement that it had 31.8 days cash on hand remaining as of May 31. According to its financial statements for the year ending Dec. 31, 2020, the rolling four-quarter debt service coverage ratio for its senior bonds was 0.88 - well below the 1.2x threshold under its bond indenture.

Florida-based Capital Trust Agency issued $219.4 million in senior living revenue bonds in 2018 to finance the cost of acquisition of the facilities from Brookdale Senior Living Inc. CTA issued four series of bonds: $143.1 million Series 2018A-1, $20.5 million Taxable Series 2018A-2, $34 million Second Tier Series 2018B and $21.8 million Third Tier Series 2018C. The bonds are secured by a pledge in project revenue and indenture reserve funds. The Series 2018A-2 and Series 2018A-1 bonds are senior in rank and priority to the second and third tier bonds.

On April 15, 2020, the borrower failed to make monthly interest and principal payments on the bonds and defaulted under the loan agreement, then requested a forbearance from its bondholders for six months, according to a May 11, 2020, notice to EMMA. On July 31, 2020, the bond trustee (at the direction of a majority of bondholders) entered into a forbearance agreement through Dec. 31, 2020. The borrower agreed to make certain payments to the trustee and adhere to an agreed-upon budget to be posted to EMMA, among other things.

In November 2020, the trustee, at the direction of holders of a majority of bondholders, retained McDermott Will & Emery as counsel to assist in restructuring negotiations.

Earlier this year the borrower sold its Ventura Hills facility in San Antonio for $2.75 million in order to free up cash and redeem certain of its bonds. Then on March 9, the borrower and trustee (at the direction of a majority of bondholders) extended the forbearance agreement until April 30. As in the prior forbearance agreement, the borrower agreed to make certain payments to the trustee and adhere to an agreed-upon budget to be posted to EMMA, among other things. However, the borrower last posted a 13-week cash flow forecast to EMMA on Sept. 25, 2020.

According to the March 9 EMMA posting, the bond trustee did not make the Jan. 1 interest or principal payment on the senior bonds, but withdrew funds from the debt service reserve funds to make partial interest (but not principal) payments on the second and third tier bonds, reducing the remaining balance of those debt service reserve funds to zero.

Under the bond documents, revenue from the facilities is distributed first to pay interest and principal and fund the debt service reserve on the senior bonds, then to the second and then third-tier bonds before going to the remaining facility operating costs. A graphic depiction of the revenue fund waterfall was provided in the offering memorandum for the bonds:

In the event that the debt service coverage ratio is less than 1.4x or the liquidity requirement (that is, having less than 30 days’ cash on hand as of June 30 or Dec. 31) is not met, payments in respect of the third tier bonds drop in within the payment waterfall to below subordinated costs and above surplus fund.

In addition to a 30-day liquidity requirement, the indenture requires the borrower to maintain a debt service coverage ratio both with respect to the senior bonds of at least 1.2x and with respect to all bonds of at least 1.05x, in each case as of each testing date (that is, June 30 and Dec. 31).
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