Invictus Introduces $ 150 Million Alternative to Capital Senior Transaction, Conversant
Another investor in Capital Senior Living (NYSE: CSU) offered an alternative to the provider’s plan to raise up to $ 154.8 million through a transaction with Conversant Capital.
Invictus Global Management on Tuesday provided lists of conditions to Dallas-based Capital Senior Living for a $ 150 million financing transaction, which it says is at market value and on terms “well above” offered by Conversant.
Austin-based Invictus specializes in debt financing and private lending and focuses on small businesses that are not on the radar of larger private equity firms.
Invictus suggests that the capital can be used to extend Capital Senior’s maturing debt as the company continues to recoup occupancy and income strained by the Covid-19 pandemic.
The details involve an immediate $ 25 million bridge loan, which would refinance the $ 25 million accordion loan that Capital Senior received from Conversant, as well as provide working capital. The loan terms have an interest rate of 10% in cash or 12% in kind, with a maturity of one year and a structuring fee of 3%.
Invictus’ proposal provides for a guaranteed term loan of $ 75 million, issued following an appraisal of Capital Senior Living’s real estate assets, and bearing a loan-to-value ratio not exceeding 75%. The loan would be secured by a first lien on all unencumbered collateral and a lower lien on all encumbered collateral, and would be used to refinance the existing loans of Capital BBVA and Fifth Third Bank.
Capital has $ 72 million in mortgage debt maturing with recourse provisions due December 2021, and $ 37 million in non-recourse mortgage debt maturing in April and May 2022. This includes $ 31.5 million in mortgage debt. with partial recourse held by Fifth Third Bank, which it defaulted at the end of the first quarter of 2021. The company and BBVA have agreed to a one-year extension of a $ 40.5 million bridging loan that will expire December 10, 2021.
In addition to the termsheets, the firm sent a letter to Capital Senior Living President and CEO Kim Lody, saying Conversant’s transactions, which changed the terms of the deal last week while also involving major shareholders Arbiter Partners and Silk Partners, remain onerous for the majority of the company’s shareholders.
Specifically, Invictus partner Amit Patel argues that the terms Conversant offers to Capital are more like those seen in distressed companies, rather than those with strong upside potential.
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“While the recently amended deal is better for shareholders, it is still off-market and far from what shareholders deserve, given CSU’s high-quality asset base and the strength of CSU’s underlying business.” , he wrote.
Invictus is the second investor in Capital Senior Living to oppose the Conversant transactions, which were first announced in July. The company did not respond to a request for comment from Senior Housing News.
Capital Senior Living has filed a presentation to investors with the Securities and Exchange Commission (SEC) on Tuesday, reiterating its position that it is continuing Conversant transactions to provide the capital needed to meet short-term debt maturities and secure the company’s status as a business in activity.
Ortelius Advisors has expressed concerns about the deal, similarly arguing that the terms are strongly in Conversant’s favor and undervalue a company that has reported six straight months of occupancy gains.
Last month, the New York-based private equity firm announced its own counter-offer to provide up to $ 70 million backing an equity rights offering, provided it is decoupled from other proposed transactions. in the Capital-Conversant agreement.
Additionally, Ortelius has been given a non-binding term sheet for a $ 46 million bridge loan for the company, at interest rates and on terms it deems more favorable to Conversant’s transactions.
On Tuesday, Ortelius announced his continued opposition to Conversant’s amended deal, arguing that the changes were agreed specifically to gain the support of Arbiter Partners and Silk Partners, at the expense of the remaining shareholders.
“Shareholders should not be forced to undergo the amended transactions simply because the board of directors has waived its right to conduct a prompt market check after the announcement and to negotiate with other viable capital providers.” , wrote Peter DeSorcy, Managing Partner of Ortelius.