Silver Birch
Silver Birch of Terre Haute Reports 50 DCOH in May; Management Argues Against Hiring Consultant for 2020, 2021 DSCR Noncompliance
Wed 06/22/2022 18:24 PM
Relevant Documents:
April and May 2022 Comparative Balance Sheet (June 22)
FY 2022 Comparative Income Statement
Financial Summary Through May 31
FY 2020 and 2021 Financial Statement and Independent Auditor’s Report
Officer’s Certificate (April 29)
Terre Haute, Ind.-based assisted living facility Silver Birch of Terre Haute was noncompliant with the liquidity covenant related to $15.8 million of Series 2017 multifamily housing revenue bonds issued by the city of Terre Haute. Terre Haute is an affiliate of a larger family of assisted living facilities that are also under financial stress, as reported.
Terre Haute reported 38.86 days’ cash on hand, or DCOH, for the quarter ended March 31, and 50 DCOH as of May 31, Silver Birch co-founder and Vice Chairman Mark Laubacher said today during a continuing disclosure call with bondholders. The bond indenture establishes a requirement of 60 DCOH. Silver Birch of Terre Haute reported 52 DCOH at the end of its 2021 fiscal year on Dec. 31, 2021.
The facility was also noncompliant with the debt service coverage ratio requirement, or DSCR, established in the bond document for fiscal years 2020 and 2021. Silver Birch of Terre Haute reported a trailing 12-month DSCR of 0.94x before Covid-19 expenses and 0.88x after Covid-19 expenses on Dec. 31, 2020, as well as 0.85x before Covid-19 expenses and 0.89x after Covid-19 expenses on Dec. 31, 2021. A breakdown of the community’s DSCR by quarter is detailed below:
The bond indenture establishes a DSCR requirement of 1.15x, calculated annually at the end of each fiscal year on Dec. 31. If DSCR is below 1.1x for two consecutive fiscal years, management is required by a majority of bondholders to hire an independent consultant to review operations and financials and submit a written report within 60 days of DSCR calculation to improve debt service coverage.
However, Silver Birch of Terre Haute is resisting efforts to hire a consultant. Laubacher argued with bondholders during the call that additional money deposited by the borrower into the reserve fund brought the community into DSCR compliance during the 2021 fiscal year and that hiring a consultant would reduce liquidity by a range of 8 to 12 DCOH, which would further set the Silver Birch back in its attempts to comply with its covenants.
Bondholders reiterated their desire that management hire a consultant, as established in the bond indenture.
--Chuck Sudo
April and May 2022 Comparative Balance Sheet (June 22)
FY 2022 Comparative Income Statement
Financial Summary Through May 31
FY 2020 and 2021 Financial Statement and Independent Auditor’s Report
Officer’s Certificate (April 29)
Terre Haute, Ind.-based assisted living facility Silver Birch of Terre Haute was noncompliant with the liquidity covenant related to $15.8 million of Series 2017 multifamily housing revenue bonds issued by the city of Terre Haute. Terre Haute is an affiliate of a larger family of assisted living facilities that are also under financial stress, as reported.
Terre Haute reported 38.86 days’ cash on hand, or DCOH, for the quarter ended March 31, and 50 DCOH as of May 31, Silver Birch co-founder and Vice Chairman Mark Laubacher said today during a continuing disclosure call with bondholders. The bond indenture establishes a requirement of 60 DCOH. Silver Birch of Terre Haute reported 52 DCOH at the end of its 2021 fiscal year on Dec. 31, 2021.
The facility was also noncompliant with the debt service coverage ratio requirement, or DSCR, established in the bond document for fiscal years 2020 and 2021. Silver Birch of Terre Haute reported a trailing 12-month DSCR of 0.94x before Covid-19 expenses and 0.88x after Covid-19 expenses on Dec. 31, 2020, as well as 0.85x before Covid-19 expenses and 0.89x after Covid-19 expenses on Dec. 31, 2021. A breakdown of the community’s DSCR by quarter is detailed below:
The bond indenture establishes a DSCR requirement of 1.15x, calculated annually at the end of each fiscal year on Dec. 31. If DSCR is below 1.1x for two consecutive fiscal years, management is required by a majority of bondholders to hire an independent consultant to review operations and financials and submit a written report within 60 days of DSCR calculation to improve debt service coverage.
However, Silver Birch of Terre Haute is resisting efforts to hire a consultant. Laubacher argued with bondholders during the call that additional money deposited by the borrower into the reserve fund brought the community into DSCR compliance during the 2021 fiscal year and that hiring a consultant would reduce liquidity by a range of 8 to 12 DCOH, which would further set the Silver Birch back in its attempts to comply with its covenants.
Bondholders reiterated their desire that management hire a consultant, as established in the bond indenture.
--Chuck Sudo
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