Fri 08/20/2021 16:09 PM
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Relevant Documents:
Call Replay Notice (Aug. 19)
June 30 Quarterly Financials (Aug. 10)
Fitch Downgrade (Mar. 19)
Joint Notice (Feb. 24)
Issue Details (2015A) (2015B) (2017)
Official Statements (2015A) (2015B) (2017)

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Dallas-based continuing care retirement facility Edgemere is in default on its $107 million-plus bond debt and is still negotiating a forbearance agreement with its bondholders, after first disclosing its upcoming default in February, according to comments made by Nick Harshfield, CFO of Edgemere’s parent company, Lifespace Communities Inc., on an Aug. 18 continuing disclosure call with bondholders. Edgemere has retained FTI Consulting and Sidley Austin as advisors, according to the company’s financial statements and Harsfhield.

Edgemere failed to meet debt service coverage ratio covenant for calendar year 2019 as well as 2020, and failure to meet its DSCR for two consecutive years is an event of default under the bond documents, according to Edgemere’s June 30 quarterly financial statements posted to EMMA on Aug. 10 and confirmed by Harshfield on the call. Harshfield also said that Edgemere was in the process of negotiating with its ground lessor. He said, however, that he was not in a position to share additional information on the nature of those discussions.

In February, Edgemere and bond trustee UMB Bank posted a joint notice to EMMA disclosing that, given the pending default, they had started discussing a possible forbearance agreement and were soliciting holders to restrict themselves from trading in order to negotiate terms for a forbearance. It is not clear whether the requisite number of bondholders have become restricted.

On March 19, Fitch downgraded Edgemere’s bond debt to CC from B+ and assigned Edgemere a CC issuer default rating on Fitch’s “belief that default, including debt restructuring is probable.” Fitch concluded that high cash burn, weak occupancy, increased competition and high leverage have contributed to Edgemere’s precarious financial condition.

Edgemere’s continuing care retirement community comprises 304 independent living units, 60 assisted living units, 31 memory support assisted living units and 72 skilled nursing beds. In 2017 and 2015 the Tarrant County Cultural Education Facilities Finance Corp. issued a total of $115.9 million in retirement facility revenue bonds, which are secured by a first mortgage liens on substantially all of Edgemere’s property, a pledge of gross revenues and a debt service reserve fund. Edgemere’s consolidated balance sheet as of June 30 showed $107 million in long-term bonds (non-current) outstanding.

Lifespace Communities acquired Edgemere in 2019 from Senior Quality Lifestyles Corp. As reported, West Des Moines, Iowa-based Lifespace Communities owns and operates 14 communities in seven states and is in the process of issuing Series 2021 bonds which are expected to close on or about Aug. 25. Edgemere is separately financed, however, and is not a part of the obligated group on that new issuance or on Lifespace’s other issuances.
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