S&P Global Ratings on Wednesday cut bonds issued for five senior assisted living facilities in Florida to D from CC after they defaulted on July 1.
The Florida-based Capital Trust Agency issued the bonds on behalf of the borrower, H-Bay Ministries Inc. of Texas, for the Superior Residences project in Florida.
According to a
“Specifically, the notice states the bond funds for the series A, B, and C bonds do not hold sufficient money to make the payments of principal and interest due to bondholders on July 1, 2021,” S&P said. "On July 6, we confirmed with the trustee that no debt service payment was made to bondholders of any class in conjunction with the July 1 payment date."
The $81.975 million deal was priced in June of 2018 and was composed of $39.68 million of Series 2018A-1 tax-exempt bonds, $13.34 million of Series 2018A-2 taxable bonds, both rated A-minus at issuance, and $20.235 million of Series 2018B tax-exempts, rated BBB.
The deal financed acquisition of five existing facilities with a total of 340 assisted living and memory care units, according to the 2018 official statement.
The bonds had been placed on negative CreditWatch in early March, “based on persistently low occupancy, as well as financial statements that lacked independent third-party audits,” according to S&P.
The CreditWatch placement was extended after “management's indication to us on June 29, 2021, that the project would not be able to make full and timely debt service payment on the bonds outstanding on the upcoming July 1, 2021 payment date,” the rating agency said.
On June 30, S&P lowered the rating on the bonds to CC and said "failure to make full payment on the rated bonds on any due date will result in the rating on the bonds being lowered to D."
S&P added that the rating on the bonds will now be withdrawn in 30 days.
“H-Bay has only been impaired since last June, when it disclosed a miss of its debt service coverage ratio target and soon after began exploring refinancing scenarios to ensure operational continuity,” according to Municipal Market Analytics' newsletter Default Trends.
MMA noted that the H-Bay Ministries deal was the second Capital Trust Agency borrower to default this year and the 11th since Jan. 1, 2020.
“Over 20% of the par issued by this conduit is currently in payment default,” MMA said.
