American Retirement Corporation Update on Refinancing Activities.Business Editors NASHVILLE, Tenn.--(BUSINESS WIRE)--Feb. 14, 2002 American Retirement Corporation (NYSE NYSE See: New York Stock Exchange :ACR See riser card. ) today announced the completion of several transactions comprising part of its recapitalization Recapitalization Restructuring a company's debt and equity mixture often with the aim of making a company's capital structure more stable. Notes: Companies often want to diversify their debt-to-equity ratio to improve liquidity. effort. The Company recently completed the sale and leaseback sale and leaseback The sale of a fixed asset that is then leased by the former owner from the new owner. A sale and leaseback permits a firm to withdraw its equity in an asset without giving up use of the asset. Also called leaseback. of three of its senior living communities and has entered into definitive agreements for sale and leaseback transactions involving two additional communities. The Company also announced that it has completed the purchase of all remaining leasehold interests of third parties in assisted living as·sist·ed living n. A living arrangement in which people with special needs, especially older people with disabilities, reside in a facility that provides help with everyday tasks such as bathing, dressing, and taking medication. communities managed by the Company. Sale/Leasebacks The Company has completed sale and leaseback transactions involving Holley Court Terrace, a congregate care community located in a suburb of Chicago, the Homewood Residence at Coconut Creek, a pre-stable free-standing assisted living community located near Ft. Lauderdale, Florida, and the Carriage Club of Charlotte, a continuing care continuing care a professional convention that a veterinarian who is treating an animal is obliged to continue treating that case unless an arrangement is made with its custodian to transfer the care to another practitioner or to a specialist. retirement community located in Charlotte, North Carolina “Charlotte” redirects here. For other uses, see Charlotte (disambiguation). Charlotte is the largest city in the state of North Carolina and the 20th largest city in the United States. . The leases for all three properties have 15 year terms, and the Company has two 5-year renewal options. The Company retained a right of first refusal Right of First Refusal In general, the right of a person or company to purchase something before the offering is made available to others. Notes: For example, a football team may have the right of first refusal on a player's contract. to repurchase each of these communities. The aggregate sale price for these three transactions was approximately $73.2 million. In addition, the Company may receive up to $1.9 million of additional proceeds, depending upon the future performance of the Coconut Creek community. A portion of the Carriage Club of Charlotte sale price was paid through the buyer's assumption of $34.8 million of mortgage debt and the issuance to the Company of $2.5 million of short-term interest bearing notes that are expected to be repaid over the next two years. The Company used a portion of the cash proceeds from these three transactions to repay $13.0 million of mortgage debt and to reduce its mortgage loan facility by $8.6 million to $73.0 million. In conjunction with and as a condition of the Carriage Club of Charlotte transaction, the Company acquired Freedom Inn at Countryside, a stable 82-unit free-standing assisted living community located in a suburb of Tampa, Florida “Tampa” redirects here. For other uses, see Tampa (disambiguation). Tampa is a United States city in Hillsborough County, on the west coast of Florida. It serves as the county seat for Hillsborough County.GR6. , for approximately $7.1 million, including the assumption of approximately $4.7 million of mortgage debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay . The Company had been managing this community for twenty nine months. Corporate Financing Activities As disclosed in the Company's filings with the Securities and Exchange Commission, the Company has been exploring a wide range of asset and corporate level financing alternatives in order to address the Company's debt maturities in 2002. These potential financing alternatives include mortgage financings, sale and leaseback transactions, and equity, equity linked, and mezzanine financings Mezzanine Financing A hybrid of debt and equity financing. Mezzanine financing is typically used to finance the expansion of existing companies, and it is basically debt capital that gives the lender the rights to convert to an ownership or equity interest in the company if the . The Company has executed definitive agreements for the sale and leaseback of two communities in addition to those described above. These two additional sale and leaseback transactions are expected to generate proceeds of approximately $49.5 million, with the possibility of up to $3.9 million of additional proceeds if certain earn-out criteria are satisfied. If completed, the Company will repay approximately $36.2 million of debt relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc these communities and will apply the remaining proceeds to satisfy other maturing obligations. These transactions are subject to certain conditions that must be satisfied prior to closing. In addition, the Company is in advanced discussions (and in certain instances has entered into non-binding letters of intent) with several different parties relating to the refinancing and/or the sale and leaseback of up to ten additional communities. If completed on the terms being considered, these proposed transactions would generate gross proceeds to the Company of approximately $190 million. These transactions are in various stages and will be subject to certain closing conditions that must be satisfied. If the above transactions are consummated as proposed, the Company's primary remaining outstanding debt obligation for 2002 will be the Company's Convertible Debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. . In an effort to address the maturity of the Convertible Debentures in October 2002, the Company has explored a wide range of corporate and asset level financing alternatives, including equity, equity linked, and mezzanine financing, and continues to work diligently with its advisors to execute on selected transactions. Managed Community Acquisition Program Completion In order to facilitate certain of its refinancing activities, the Company has purchased for approximately $19.2 million all of the remaining leasehold interests of third parties in assisted living communities managed by the Company. The Company financed these transactions through the issuance of approximately $17.2 million of long-term interest-only senior secured notes and approximately $1.9 million in cash. As a result, the Company will now consolidate the operations of ten additional assisted living residences that were previously managed. These communities currently have approximately $20 million of in-place annual revenues and produce positive cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses . In addition, the Company is in the process of eliminating its synthetic lease Synthetic Lease An operating lease that is structured in a way so that it is not recorded as a liability on the balance sheet. Instead, it is considered to be an expense on the income statement. structures. A number of these synthetic leases will be eliminated in connection with the execution of the refinancing transactions described above and the Company has initiated processes aimed at eliminating its other synthetic lease arrangements. "We have committed extensive resources, both internally and externally, to facilitate the execution of our refinancing program. We are generating sufficient cash to satisfy our operating requirements, and we are making progress in our efforts to deal with our maturing obligations as evidenced by the completion of several financing transactions," said Bill Sheriff, Chairman and Chief Executive Officer of the Company. "We believe it is important to simplify our capital structure so we are pleased to have made a major step in that direction by completing our purchase of the leasehold interests in our remaining managed assisted living facilities. We also intend to eliminate our synthetic lease arrangements over the intermediate term, which we expect can be accomplished with little cost to the Company." American Retirement Corporation offers a broad range of care and services to seniors, including independent living, assisted living, skilled nursing and Alzheimer's care. The Company currently operates 66 senior living communities in 14 states with an aggregate capacity for approximately 14,700 residents. The Company's strategy is to develop senior living networks in major metropolitan regions. These networks are made of large continuing care retirement communities and free-standing assisted living residences located in the same markets. This press release and statements made by or on behalf of the Company relating hereto here·to adv. To this document, matter, or proposition. hereto Adverb Formal or law to this place, matter, or document Adv. 1. , including all statements concerning the Company's recapitalization efforts, proposed equity financings Equity Financing The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. , proposed sale and leaseback transactions, potential payments pursuant to earn-out arrangements, and results of operations for future periods, may be deemed to constitute forward-looking information made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. may be affected by certain risks and uncertainties, including the Company's ability to complete successfully its recapitalization efforts, adverse developments in the financial markets or the senior living industry that may negatively impact the Company's proposed transactions and financings, the Company's ability to comply with the covenants contained in its debt instruments, the Company's significant leverage, and the risk factors described in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2000 under the caption "Risk Factors" and in the Company's other filings with the Securities and Exchange Commission. The Company's ability to complete its proposed transactions and financings is subject to numerous uncertainties and conditions not within the Company's control. Certain of the Company's agreements with respect to the proposed transactions and financings are non-binding and there can be no assurance that the Company will be able to enter into definitive agreements and complete the proposed transactions and financings. In light of the significant uncertainties inherent in the forward-looking statements included herein, the Company's actual results could differ materially from such forward-looking statements and there can be no assurance that the Company will able to refinance or repay its debt obligations (including the Company's Convertible Debentures) when they come due. The Company does not undertake any obligation to publicly release any revisions to any forward-looking statements contained herein to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. |
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