Thu 05/13/2021 14:33 PM
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Editor’s Note: Reorg's coverage of Miami Jewish Health Systems is part of an expansion of our municipals-focused offerings. Please reach out to sales@reorg.com for more information.

Relevant Documents:
Notice (May 11)
August 2020 FTI Report
Notice (Aug. 2020)
Notice (Jan. 2020)
Notice (Nov. 2019)
Financial Report (April 2021)
Issuer Homepage

Following an event of default in November 2019 and a subsequent forbearance agreement with its bondholders, the forbearance period for Miami Jewish Health Systems’ $44.035 million in Series 2017 bonds is set to expire on June 12. However, in its most recent published financials, the company reports excess revenue of $20.163 million for the eight months ending Feb. 28 compared with a budgeted expense of $2.03 million, resulting in a variance of $22.192 million. To read more of our Americas Municipals' coverage of the Miami Jewish Health Systems forbearance period as well as our coverage of  other timely, objective and actionable intelligence covering higher yielding and liquid municipal issuers request a trial here.

The company has scheduled a conference call for bondholders on May 27 at 4 p.m. ET.

Miami Jewish Health Systems, or MJHS, owns and operates senior living and healthcare facilities in Florida. Its main Miami campus comprises a long-term and short-term care nursing home with 438 skilled nursing beds, a 32-bed acute care hospital, a residential housing unit with independent and assisted living rental units, an ambulatory health clinic, an advanced pain management program and rehabilitation center, and a managed care services operation. MJHS also consists of four Medicare/Medicaid capitation programs (so-called Program for All-Inclusive Care, or PACE, Centers) for individuals otherwise requiring nursing home care, and the Miami Jewish Health Systems Foundation Inc., an organization providing financial assistance to MJHS.

In November 2019, MJHS posted a notice of an event of default, stating that it failed to achieve a historical debt service coverage ratio, or HDSCR, of at least 1:1 for the fiscal year ended June 30, 2019 (the actual HDSCR was 0.52), and that its days cash on hand as of June 30, 2019, was 94, well below the 300-day covenant. This resulted in an event of default on its Series 2017 bonds. As required by the bond indenture, MJHS selected FTI as a consultant to advise the company with respect to its financial condition.

In January 2020, UMB succeeded Bank of New York Mellon as bond trustee and retained Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC to represent it in connection with the bonds.

According to an Aug. 3, 2020, notice, UMB and MJHS entered into a forbearance agreement that provided, among other things, that UMB will forbear from exercising remedies until the earlier of June 12 or the occurrence of a forbearance termination event. The forbearance termination events are outlined in the notice and include breach of forbearance covenants, failure to meet forbearance milestones, a bankruptcy or similar proceedings, and a sale or lease of a material portion of assets without the consent of UMB. The forbearance agreement also provides for certain limitations on MJHS incurring additional indebtedness and indicates that there would be revised days cash on hand and debt service coverage ratio covenants based on MJHS’s revised projections.

Pursuant to the forbearance agreement, FTI would deliver a follow-up report to UMB, which was posted on EMMA on Aug. 26, 2020. Further, the agreement set forth certain reporting requirements, including MJHS’s hosting of quarterly calls to discuss financials, operations and progress on the implementation of FTI’s recommendations.

According to FTI’s report in August 2020, MJHS was projected to return to compliance for the debt service coverage ratio requirement in the fourth quarter of fiscal year 2021 (April through June 2021) based on its financial projections, but the days cash on hand was not projected to return to compliance primarily due to the economic impact of the Covid-19 pandemic.

In its most recent financials, which were posted to EMMA on April 15, the company discloses a historical debt service coverage ratio of 2.16 and 88 days cash on hand.

The company reported cash and cash equivalents of $25.2 million and the current portion of investments of $5.6 million. Although the variance in actual net patient revenue versus the budget was negative $5 million for the eight-month period ending Feb. 28, capitated and other revenue was able to offset this, resulting in total revenue variance of negative $50,631. Operating income was negative $2.9 million, a positive variance of $3 million. EBITDA was $1 million for the eight-month period. Operating cash flow was $20.3 million, and the company spent $0.7 million on the purchase of property and equipment during the period.

The company reported that annualized ambulatory health clinic procedures reached 6,806 in the third quarter of fiscal 2021, the highest since the fourth quarter of fiscal 2020.
Miami Jewish Healthy Systems forbearance period

For the eight months ending Feb. 28, the company discloses a return on investment of $15.75 million, explaining in a footnote that this amount includes $16.8 million of gain on the sale of its investment in unconsolidated affiliates. The company had budgeted negative $294,919, resulting in a variance of $16.05 million. As noted above, the company reported excess revenue of $20.163 million for the period.
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