AlerisLife signs $95 million credit and security agreement due 2025

By William Gullotti

Buffalo, N.Y., Jan. 31 – AlerisLife Inc., formerly known as Five Star Senior Living Inc., and its subsidiaries entered into a credit and security agreement with MidCap Funding VIII Trust as administrative agent and lender on Jan. 27, according to a form 8-K filed with the Securities and Exchange Commission.

The agreement is a $95 million senior secured loan maturing Jan. 27, 2025. Subject to the payment of an extension fee and some other conditions, the company has the option to extend the maturity date by one year on two occasions.

When the agreement took effect, $63 million of the loan was funded, including about $3.2 million in closing costs. The remaining proceeds are subject to a $12 million capital improvements holdback with $20 million becoming available upon achieving certain financial thresholds.

Interest on the loan is set at SOFR, subject to a 0.5% SOFR floor, plus 450 basis points.

Voluntary prepayments on the loan made within 18 months of the effective date of the loan will be subject to a prepayment fee. The assessed fee will be the greater of 0.5% of the outstanding balance and the yield maintenance amount, which is the sum of the remaining payments of interest and any administrative, site inspection or collateral management fees through the closed period that will not be made due to prepayment.

Prepayments made after 18 months may be made without premium or penalty, excepting the exit fee attached to any loan prepayment. The exit fee will be applied in addition to the aforementioned prepayment fee during the closed period.

Some subsidiaries listed as borrowers under the agreement and AlerisLife provided a payment guarantee of up to $40 million of the obligations under the agreement as well as standard non-recourse carveouts. The guarantee agreement requires the company and subsidiary to comply with various covenants, including restricting the ability to make distributions to shareholders.

The loan is secured by the real estate mortgages on 14 senior living communities, the borrower’s assets and some related collateral.

Proceeds from the loan will be used for working capital, operational expenses and strategic acquisitions.

At closing, AlerisLife had over $100 million of unrestricted cash and cash equivalents.

In connection with the new loan, the company terminated its revolver, signed June 12, 2019, with Citibank, NA that was scheduled to mature June 2022.

On Jan. 25, the company adopted amended and restated bylaws which changed its name from Five Star Senior Living to AlerisLife. Effective the same date, the company’s shares of common stock began trading on the Nasdaq Stock Market LLC under the ticker symbol “ALR”.

AlerisLife is based in Newton, Mass., and engages in senior living operations including independent living communities, assisted living communities, skilled nursing facilities and outpatient rehabilitation therapy services.

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