Genesis HealthCare, one of the nation’s largest providers of post-acute care, announced it has secured new financing commitments including a commitment for a new $555 million asset based lending (ABL) facility and an agreement for an amended and expanded term loan. The Company also provided an update on its previously announced master lease and loan restructurings that will substantially reduce annual cash fixed charges retroactively to January 1, 2018. The new ABL facility extends the maturity of the to-be-replaced facility by three years through 2023, ensuring long-term access to working capital financing.

MidCap Financial Trust (MidCap) issued a commitment letter pursuant to which MidCap will provide the Company with a $555 million ABL facility comprised of (a) a $325 million first lien term loan facility, (b) a $200 million first lien revolving credit facility and (c) a $30 million overline facility (collectively, the “New ABL Credit Facilities”).

The New ABL Credit Facilities will have a five year term and proceeds will be used to replace and repay in full the Company’s existing $525 million revolving credit facilities that are scheduled to mature on February 2, 2020.

Borrowings under the term loan and revolving credit facility components of the New ABL Credit Facilities will bear interest at a 90 day LIBOR rate (subject to a floor of 0.5%) plus an applicable margin of 6%.  Borrowings under the overline component will bear interest at a 90 day LIBOR rate (subject to a floor of 1%) plus an applicable margin of 11%. Borrowing levels under the term loan and revolving credit facility components of the New ABL Credit Facilities are limited to a borrowing base that is computed based upon the level of eligible accounts receivable.

The commitments with respect to the New ABL Credit Facilities are subject to certain customary closing conditions.  The New ABL Credit Facilities will contain representations and warranties, affirmative covenants, negative covenants, financial covenants and events of default and security interests that are customarily required for similar financings.

Subject to the satisfaction of the closing conditions, the Company and MidCap expect to close the New ABL Credit Facilities by March 9, 2018.  The Company’s existing Revolving Credit Facilities are currently subject to a forbearance agreement that expires on March 21, 2018.

Term Loan Commitment

The Company has entered into an agreement with affiliates of Welltower, Inc. (Welltower) and Omega Healthcare Investors, Inc. (Omega) to amend and expand the Company’s existing $124 million term loan agreement. The amendment calls for (1) a new $40 million term loan tranche, (2) changes to interest obligations, and (3) the elimination of any principal amortization prior to maturity.  Proceeds from the new $40 million tranche will be used for general corporate purposes. 

Effective February 15, 2018, weighted average borrowings under the term loan facility will bear interest at a rate equal to 14%, of which 5% will be paid in cash and the remaining interest will be paid-in-kind.   Borrowings under the term loan facility originally carried interest at a rate equal to a LIBOR rate (subject to a LIBOR floor of 1%) plus an applicable margin of 13%, of which all but 2% was paid in cash.

The agreements with respect to the amended and expanded term loan facility are subject to certain closing conditions. The amended term loan facility agreement will contain representations and warranties, affirmative covenants, negative covenants, financial covenants and events of default and security interests consistent with the original term loan facility agreement.

Subject to the satisfaction of the closing conditions, the Company, Welltower and Omega expect to close the amended term loan facility concurrently with the New ABL Credit Facilities by March 9, 2018.

Restructuring Plan Updates

In November 2017, the Company announced it had reached preliminary non-binding agreements with its counterparties to the Welltower Master Lease, the Sabra Master Leases, the Welltower Bridge Loans and certain other loans to strengthen significantly the capital structure of the Company.

In addition to the new financing commitments discussed above, the Company is pleased to report the following important updates with respect to the Restructuring Plans:

Restructuring Plans Impacting Rents

Sabra Master Leases

In December 2017, Sabra Health Care REIT, Inc. (Sabra) completed the sale of 20 Genesis leased assets in Kentucky, Ohio and Indiana.  Genesis continues to operate these facilities with a new landlord subject to a market based master lease.

In addition, Genesis has entered into a definitive agreement with Sabra resulting in permanent and unconditional annual cash rent savings of $19 million effective January 1, 2018.  Sabra continues to pursue and the Company continues to support Sabra’s previously announced sale of Genesis leased assets.  At the closing of such sales, Genesis expects to enter into lease agreements with new landlords for a majority of the assets currently leased with Sabra.

Welltower Master Lease

Genesis has entered into a definitive agreement with Welltower to amend the Welltower Master Lease.  The amendment provides Genesis with permanent and unconditional annual cash rent savings of $35 million effective January 1, 2018.  Welltower continues to pursue and the Company continues to support Welltower’s previously announced sale of Genesis leased assets.  At the closing of any such sales, Genesis expects to enter into lease agreements with new landlords for a majority of the assets currently leased with Welltower.

Pursuant to the lease amendment, the initial term of the Welltower Master Lease will be extended five years to January 31, 2037 and the annual rent escalator will be reduced from approximately 2.9% currently to 2% starting in 2019.   The proposed lease amendment also provides for a potential rent reset, conditioned upon achievement of certain upside operating metrics, effective January 1, 2023. If triggered, the benefit of such upside performance is shared by both the Company and Welltower, with the incremental rent from the rent reset capped at $35 million.

Restructuring Plans Impacting Debt and Debt Service

Welltower Bridge Loans

At December 31, 2017, the Company has approximately $275 million of outstanding real estate loans (the Welltower Bridge Loans) due January 1, 2022.  The Welltower Bridge Loans currently carry a 10.25% cash pay interest rate that increases by 0.25% annually on January 1.

Genesis has entered into a definitive agreement with Welltower to amend the Welltower Bridge Loan agreements.  The proposed amendments adjust the annual interest rate beginning February 15, 2018 to 12%, of which 7% will be paid in cash and 5% will be paid-in-kind.  In connection with the proposed amendments, Genesis has agreed to make commercially reasonable efforts to secure commitments by April 1, 2018 to repay no less than $105 million of the Welltower Bridge Loan obligations.  The Company continues to make progress on a number of refinancing and asset sale transactions in order to secure such commitments. 

In the event the Company is unsuccessful securing such commitments or otherwise reducing the outstanding obligation of the Welltower Bridge Loans, the cash pay component of the amended interest rate will be increased by approximately $2 million annually.