Tue 06/29/2021 15:03 PM
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Editor’s Note: Reorg's coverage of Friendship Village of Schaumburg is part of an expansion of our municipals-focused offerings. Please reach out to sales@reorg.com for more information. Continue reading as our Americas Municipals team provides an update on the UMB Bank NDAs and click here to request a trial for access to the linked documents as well as our analysis and reporting on hundreds of other stressed, distressed and performing credits.

Relevant Documents:
Notice of Account Balances (June 29)
Quarterly Investor Report (May 28)
Notice of Non-Payment (Jan. 15)
Letter Regarding Suspension of Debt Payments (Jan. 6 )
Offering Memorandum
Issuer Homepage

UMB Bank, as bond trustee, and an ad hoc group of majority holders of $122.6 million in revenue bonds tied to the Friendship Village of Schaumburg retirement community outside of Chicago have signed NDAs with the company regarding its ongoing payment defaults on the bonds, according to a notice the trustee posted to EMMA today, Tuesday, June 29. The trustee has hired Mintz Levin as counsel and RBC Capital Markets as financial advisor in connection with the negotiations. UMB Bank also disclosed the following balances in the respective accounts under the indenture:

  • Interest fund account: $8.10

  • Bond sinking fund: $103,854.78

  • Debt service reserve fund account: $7,401,905.88.


The Illinois Finance Authority issued the bonds in 2017 to redeem prior bond issuances related to Friendship Village of Schaumburg and for capital expenditures in connection with rehabilitating and remodeling the facility. The Series 2017 bonds are secured by the community’s gross revenue and a security interest in its real property. Friendship Village operates a continuing care retirement community in Schaumburg, Ill., a suburb about 32 miles from downtown Chicago. The community is on a 60-acre campus and comprises approximately 28 independent living garden homes, 574 independent living apartments, 87 assisted living units, 25 memory support assisted living units and a 248-bed skilled nursing facility, according to the 2017 offering memorandum.

On Jan. 6, the borrower posted a notice to EMMA informing its bondholders that it would be suspending payment of debt service “as an emergency measure to preserve cash for on-going operating needs.” The borrower cited the Covid-19 pandemic and measures taken to comply with the Illinois Department of Public Health regulations and CDC guidelines as causing “significant reductions in census and move-ins,” resulting in lowered entrance fee and operating income. For the nine months ending Dec. 31, 2020, the borrower noted, entrance fees received were more than $9 million below budget. During that same time period, the borrower’s independent living revenue, assisted living revenue and skilled nursing revenue were $785,000, $308,000 and $1.5 million below budget, respectively.

On Jan. 15, UMB Bank posted a notice to EMMA stating that the borrower failed to make the Jan. 10 monthly note payment, resulting in an event of default. At the time, UMB Bank hired Mintz Levin and had been in contact with an ad hoc group of bondholders of a majority in aggregate principal amount of the bonds, according to the posting.

A quarterly investor report posted May 28 also shows that the borrower is not in compliance with its liquidity ratio/days cash on hand covenant, reporting 93.6 days cash on hand as of March 31, compared with a 150-day requirement. The debt service coverage ratio for March 2021’s 12-month rolling average was “0.00,” and on a revenue-only basis it was 0.33. The minimum covenant level is 1.20x, according to the report. The report explains that net entrance fee receipts were lower than in the prior quarter by $6.8 million, and income from operations available for debt service was $1.5 million lower than in the prior quarter.
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