Sunrise Senior Living enters $50 million revolver, plans amendment

By Jennifer Chiou

New York, May 6 - Sunrise Senior Living Inc. entered into a commitment for a new $50 million senior revolving line of credit anticipated to close during the second quarter, according to a 10-Q filing with the Securities and Exchange Commission.

Sunrise said in a news release that KeyBank NA is providing the loan.

The company noted that it has no borrowing availability under its bank facility and has financed its operations with cash generated from those operations. Sunrise added in an 8-K filing that it believes it has sufficient cash to meet obligations through 2011.

The company also noted that there was $13.5 million of letters of credit outstanding at the close of March. These letters of credit are fully cash collateralized.

Sunrise said that it had $41.5 million and $66.7 million of unrestricted cash and cash equivalents at March 31 and Dec. 31, respectively.

The news release stated that Sunrise reduced its consolidated debt to $154.7 million at the end of March from $163 million at Dec. 31.

Acquisition, amendment planned

On April 19, the company entered into a purchase and sale agreement with Morgan Stanley Real Estate Fund VII Global-F (U.S.), LP, Morgan Stanley Real Estate Fund VII Special Global (U.S.), LP, MSREF VII Global-T Holding II, LP and Morgan Stanley Real Estate Fund VII Special Global-TE (U.S.), LP, which collectively own 80% of the membership interests in AL US Development Venture LLC.

Sunrise holds the remaining 20% of membership interests in AL US, and under the agreement, Sunrise will purchase the 80% of interests for an aggregate purchase price of $45 million.

According to the 8-K, AL US indirectly owns 15 assisted and independent living facilities currently managed by Sunrise.

With the purchase agreement, AL US will seek to enter into a loan modification with HSH Nordbank AG, New York Branch. The company also needs lender approval for the transaction.

The loan amendment would extend the maturity date by three years to June 14, 2015. As of April 30, $354 million was outstanding under the AL US loan.

The amendment would also provide, among other things, for a partial paydown by AL US of $25 million of the loan and the modification of certain debt service coverage ratio tests and other provisions.

After the close of the transaction, AL US will become a consolidated subsidiary. Sunrise said it expects this to have a significant impact on its financial statements.

$1.4 million in default

The filing also stated that during the first quarter, the company considered its equity investment in one of its ventures to be impaired based on economic challenges and defaults under the venture's construction loan agreements, prompting it to write down the investment by $2 million.

As of March 31 and the end of 2010, the company had $154.7 million and $163.0 million, respectively, of outstanding debt with a weighted average interest rate of 2.91% and 2.78%, respectively. This includes community mortgages, liquidating trust notes and other debt.

Of the outstanding debt at the close of March, $1.4 million was in default. The company noted that it is in compliance with the covenants on all of its other consolidated debt and expects to remain in compliance in the near term.

Sunrise is a provider of senior living services and is based in McLean, Va.

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