Wed 12/29/2021 17:46 PM
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Relevant Document:

UMB Bank, the bond trustee for the $30.3 million senior living revenue bonds issued on behalf of Leading Life Senior Living’s Autumn Leaves project, and a steering group of institutional holders of senior bonds have reached an agreement in principle after more than a year of negotiations, according to a notice posted to EMMA today. The agreement in principle would effectuate a transition of the current manager of the project to a new management firm to be selected by the bondholder group after an interview process involving Leading Life, the notice says. The notice indicates that the parties have memorialized the agreement in a settlement term sheet and a forbearance agreement in order to resolve the events of default that have occurred and are continuing “with a view to stabilizing the Project.”

The trustee requests that bondholders affirmatively direct the trustee whether to enter into the proposed transaction, and the notice includes an election form to be returned by Jan. 7, 2022.

During the forbearance period, the borrower will not be required to make payments of principal and interest owing on the bonds or to replenish the debt service reserve fund, or DSRF. The forbearance agreement runs through Jan. 15.

The salient terms of the agreements are disclosed, though the term sheets themselves are not included in the filing. The terms of the settlement agreement are as follows:

  • The borrower will exercise rights under the “Memory Care Management Agreements” to replace the current manager of the project, J&M Family Management LLC with the Long Hill Co.

  • “The Borrower will work cooperatively with the Trustee and Long Hill to protect the health, safety and welfare of the residents during the transition process.”

  • The parties anticipate completing the manager transfer by the Jan. 15, 2022, transfer date.

  • The parties, other than an insider member of the borrower’s board of directors, will enter into a mutual release effective on the occurrence of the transfer date.

  • The trustee will establish a liquidity support account to fund expenses in connection with the manager transition, subject to an agreed budget. The notice specifies that the liquidity support account “will be funded from funds available under the Indenture or provided by holders of the Bonds. Any funds advanced from the Liquidity Support Account will be repaid by the Borrower on a superpriority basis.”

The notice states that Long Hill has informed the trustee that there will likely be a need for additional support over the next 12 months, estimating the need for about $750,000. The shortfall will be funded from the liquidity support account, the notice says, which consists of funds on hand under the indenture and/or funding from holders of bonds “that support the Trustee entering into the proposed Settlement Term Sheet and Forbearance Agreement.” Given the available funds in the trust accounts, a budgeted shortfall in the amount of approximately $387,000 exists, the notice states.

The funds available for use directly by the bondholders are below:

According to UMB Bank, “[A]s of the date of this Notice and based on current estimates available to the Trustee, the funds on hand are sufficient to fund the Liquidity Support Account in the amount projected by Long Hill as required to support the transition at the outset.” The trustee suggests that bondholders who support the transaction “should be willing (but are not required) to fund into the Liquidity Support Account if needed in the event of increased liquidity needs over the course of the transition.”

The salient terms of the forbearance agreement are as follows:

  • The forbearance period will run until the earlier of (a) Jan. 15, 2022, and (b) the occurrence of any “Forbearance Termination Event,” which includes “typical” events of default as well as the failure of the transfer date to occur by Jan. 15.

  • The borrower will subject all of its deposit accounts to control agreements acceptable to the trustee.

  • The borrower will develop a rolling 13-week budget acceptable to the trustee.

  • During the forbearance period, the borrower will not be required to make payments of principal and interest owing on the bonds, or to replenish the DSRF.

  • The borrower will provide releases to the trustee and the bondholders from all claims whatsoever, including claims relating to the project, forbearance or bond documents.

UMB Bank was represented by Colleen Murphy and Kevin Walsh of Greenberg Traurig in the negotiation and documentation of the proposed transaction as well as general matters related to the bonds.
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