Elant at Fishkill

sims finances 99% of acquisition cost, including working capital with 5 series of bonds

description

Elant at Fishkill, Inc. was formed to acquire two nursing homes, Fishkill Health Care Center (“Fishkill”) and Hudson Haven Care Center (“Hudson Haven”) in Dutchess County, New York. Fishkill, located in Beacon, New York, is a 160-bed nursing facility which provides adult foster care, long-term home health care, and outpatient rehabilitation. Hudson Haven, located in Wappinger Falls, New York, is a 62-bed skilled nursing facility. Elant at Fishkill is affiliated with Elant, Inc. , a network of predominantly not-for-profit corporations that provide services to the elderly in the mid-Hudson Valley, New York region. The Elant System currently operates skilled nursing facilities, adult homes, a continuing care retirement community, and a variety of community-based programs.

challenge

Elant at Fishkill’s main goal was to finance the acquisition with the least expensive cost of capital, while minimizing its equity requirements. To minimize cash requirements to be paid to the seller at the time of acquisition, Elant at Fishkill needed a creative financing structure. In addition, Elant had to keep the tax-exempt financing below $20 million, the maximum bond amount which could be issued through the Dutchess County Industrial Development Authority (“IDA”), despite costs that were greater than $20 million.

Elant at Fishkill Health Center - Beacon, NY

implementation

Herbert J. Sims & Co. developed a finance plan which incorporated non-rated, tax-exempt bonds to be sold to the public, which funded a portion of the purchase price. Sims helped Elant negotiate with the seller of these facilities to assume both senior and subordinate debt for the remainder of the purchase price, thus reducing Elant’s cash requirements at closing. The seller also made a $1 million donation to Elant at Fishkill at closing to fund working capital requirements.

result

Herbert J. Sims sold $17.145 million of non-rated, tax-exempt bonds with a 30-year maturity. Even with the IDA’s requirement for $100,000 minimum denominations for the bond sale, Sims priced the long-term bond yield at 5.30%, which is among the lowest pricing in the industry for nursing home acquisitions. The other components of the financing which were negotiated with the seller included: (a) $2.855 million of senior, tax-exempt bonds with a rate of 4.25% held by the seller; (b) three taxable loans held by the seller which totaled $3.785 million and are subordinate to the two series of senior debt; and (c) the $1 million donation from the seller. The two series of senior tax-exempt bonds totaled approximately 80% of the project costs, and the net cash paid to the seller at bond closing was approximately 63% of the purchase price. By combining senior and subordinate debt, Elant was able to finance approximately 99% of the purchase price, working capital, and other project costs.