Sunrise to restructure loans through stock issuance, asset sales

By Angela McDaniels

Tacoma, Wash., Oct. 28 - Sunrise Senior Living, Inc. will issue up to 5 million shares of common stock to its lenders under a restructuring agreement reached on Oct. 22, according to an 8-K filing with the Securities and Exchange Commission.

The company will also grant mortgages to the lenders on some of its unencumbered North American real property. Sunrise will then sell the mortgaged properties and distribute the proceeds to the lenders, which have been guaranteed at least $58.3 million of proceeds within 30 months.

The shares and mortgages will be granted to lenders that elect to settle their claims against the company by participating in the restructuring.

Two lenders, Capmark Finance Inc. and Natixis, London Branch, have already agreed to participate. Their claims had a value of approximately $121.6 million, or roughly 77.5% of the claims asserted by lenders that may elect to participate in the restructuring transaction.

In addition, Sunrise will market for sale the German assisted living communities subject to loan agreements with the electing lenders and will remain responsible for all costs of operating these communities until the earlier of either their sale or Dec. 31, 2010.

The closing of the transaction, including the execution of definitive documentation, the release of claims and the issuance of Sunrise common stock, is conditioned on the receipt of consent for the transaction from Bank of America, NA, the administrative agent under Sunrise's credit agreement, by Nov. 11.

Fountains portfolio

Sunrise also announced that it entered into agreements with Sunrise's joint venture partner in the Fountains portfolio and with HSH Nordbank AG, New York Branch, the lender to the Fountains venture, to release Sunrise from all claims that the joint venture partner and HSH Nordbank had against Sunrise.

The company was also released from all future funding obligations in connection with the Fountains portfolio.

In exchange for these releases, Sunrise has, among other things:

• Transferred its 20% ownership interest in the Fountains joint venture to its joint venture partner;

• Contributed vacant land parcels adjacent to six of the Fountains communities and owned by Sunrise to the Fountains joint venture. The contributed land parcels were valued at $12.9 million as of Sept. 30; and

• Agreed to transition from management of the 16 Fountains communities as soon as the transition closing conditions are met and the new manager has obtained the needed regulatory approvals. Sunrise expects the transition to happen in 2010.

Sunrise is based in McLean, Va., and provides senior living services.

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