Four Seasons sets out new terms as loan maturity looms
TROUBLED care home operator Four Seasons Health Care has written to loan noteholders with proposals for a two-year extension on the maturity of its £780m loan, to avoid defaulting on the debt in September.
The letter of terms follows a meeting the company held with creditors in April, where the group aimed to negotiate the terms of a possible extension with the holders of £600m worth of notes.
The company’s debt for equity restructure in December reduced its debt by more than 50% to around £780m.
As part of that £600m worth of publicly-traded commercial mortgage-backed floating notes were issued, split into two groups, known as Class A1 and Class A2. They mature in 2013, and have mostly been taken up by commercial banks, institutional investors and hedge funds.
As previously reported, Four Seasons wants to extend the full loan, known as the Four Seasons Whole Loan, due this September. However, to do this it needs consent from 75% of each of the Class A1 and the Class A2 Titan noteholders.
The proposal is to extend the FSWL maturity date by two years to September 2012 – originally the group had hoped to extend the whole loan to 2013, so that it expired at the same time as the £600m of loan notes held by Titan noteholders. Now, the class A1 and A2 notes will be also extended – to September 2014.
The group said the proposal had been based on extensive discussions with noteholders as well as prospective investors, and rating agencies.
Under the terms Class A1 and Class A2 notes will be repriced “to reflect changing market conditions”.
Pricing on the A1 notes will be increased by 350 basis points to 375 basis points over Libor, and pricing on the A2 notes increased from a flat level of 38 basis points over Libor to 500 basis points over Libor in cash plus a 250-300 basis point on the payment-in-kind toggle portion.
An additional margin of 100 basis points will become payable on the loan notes if the group fails to secure redemption of the £100m Class A1 notes by January 2012.
The company added that a fee of 60 basis points will be paid on completion to those who sign the lock-up agreement by July 16; with a reduced fee of 320 basis points paid to those who sign up after that date.
In the letter chairman Geoff Westmore said: “We believe an extension can be offered which will provide attractive economic terms for noteholders and at the same time avoid reinvestment risk and the prospect of payment defaults, ratings downgrades and continued low margin pricing.”
He added: “The board is committed to achieving a long term refinancing of the FSWL as soon thereafter as possible.”
