Ziegler has achieved a unique position within the non-profit senior living finance sector due to our ability to implement financing solutions that incorporate a variety of financial tools to meet our client’s needs. Our firm has developed a suite of innovative products and services that accommodate the most complex financings for virtually every type of non-profit senior living provider.
We value relationships. At Ziegler our primary goal is to build and maintain a strong and trusted relationship with each client based on the delivery of services, which go beyond the financing itself, and enables clients to meet their goals. The effectiveness of our team is evident in our plan of finance that pursues the lowest cost of capital, regardless of the market movements and a trusted advisor relationship that extends beyond the financing.
OUR PRODUCTS
Tax-Exempt Bonds. Our primary focus is on funding capital projects for non-profit senior living organizations that are able to utilize tax-exempt debt. Since 1990, Ziegler has brought to market approximately $20 billion of tax-exempt bond issues for senior living providers.
Taxable Bonds. Ziegler also focuses on taxable finance. Taxable bonds are particularly relevant to clients doing acquisition financings.
Rated Fixed-Rate Bonds. Institutional and experienced-retail bond investors recognize the value of the senior living facilities offering rated fixed-rate bonds. As a result of the investment grade rating, they reward the facility for its strong financial performance with lower interest rates, as compared to non-rated bonds. Additionally, investors accept more flexible covenants because of the perceived financial strength of the senior living organization.
An organization receives a credit rating after a detailed operational review by one or more of the rating agencies. Investment grade ratings range from “BBB-” to “AAA.”
Non-Rated Fixed-Rate Bonds. Both institutional and experienced-retail investors recognize that many unenhanced, non-rated fixed-rate bonds are issued for sound facilities that do not fit the rating agencies’ criteria for investment-grade bonds. While they may require higher interest rates for an unenhanced bond issue, bond investors may also allow for more flexible credit terms and alleviate the requirement of an annual letter of credit fee. This type of investor often accepts higher leverage, temporarily low cash positions, or more aggressive assumptions on reimbursement increases or revenue growth.
EXTRASSM (Extendable Rate Adjustable Securities) are a proprietary Ziegler product. EXTRAS offer a long-term amortization, up to 35 years, with a three- to 10-year interest rate reset period. At each rate-reset period, investors have the option to hold bonds at the new rate or tender the bonds for remarketing. The tendered bonds are remarketed at the new rate and term to new investors or ‘put’ back to the borrower for redemption. The remarketing or put is not guaranteed however; and investors may be forced to maintain their current positions; investors generally receive a premium above short-term rates for this risk. In 2009, Ziegler changed the name of EXTRAS financing temporary debt to ARROS to help distinguish the two products.
TEMPSSM (Tax-Exempt Mandatory Paydown Securities) are underwritten exclusively by Ziegler, TEMPS are fixed rate term bonds carrying a short-term maturity, usually three to four years beyond the expected redemption. TEMPS are structured as bullet repayments, with required optional redemptions as entrance fees are collected. TEMPS are designated according to the project occupancy level at expected redemption: TEMPS-50, for example, are expected to be redeemed at 50% occupancy; TEMPS-80 at 80% occupancy. There is no guarantee that they will be repaid according to the expected payoff and, as a result, may remain outstanding until maturity.
ARROSSM (Accelerated Redemption Reset Option Securities) are underwritten exclusively by Ziegler, ARROS are used in projects with an initial entrance component and are forecast to be retired with entrance fee proceeds post-opening. They carry an adjustable rate and a term of 30 to 35 years, but are expected to be retired through required optional redemptions within four years of project opening. The initial rate period (five to seven years) is set to extend beyond expected paydown, with an initial interest rate matched to that initial term. If the planned early redemption does not happen, a distinctive feature of the ARROS is that automatic one-year extensions begin at the end of the initial rate period, with no call protection, and the new interest rate is either set at remarketing, or is pegged to long-term fixed rates, including the secondary market value of any fixed rate bonds in the debt issuance. Like the EXTRAS, an investors’ ability to put the bonds at the reset period is not guaranteed and ARROS carry a premium above short-term rates for this risk.
Credit Enhancement. Ziegler’s experience and knowledge includes a variety of types of credit enhancement, bank letters of credit, bond insurance, FHA insurance and other forms of credit enhancement.
To help clients maximize or minimize certain benefits and exposures, we explore the availability of credit enhancement on every transaction. The Ziegler team’s comparative analyses identify the advantages and disadvantages of using a credit enhancement facility. The team then recommends appropriate financing techniques.
Our comparative analyses examine the following:
- Cost Analysis
- Document Flexibility
- Prepayment Provisions
- Issue Term
- Amortization Periods
- Covenant Restrictions
- Organizational Goals
Because the lead time to bring a tax-exempt bond issue to market can vary dramatically from 90 days to a few years for a new campus financing, we often structure a financing on multiple tracks, pursuing different plans of finance simultaneously, in order to maximize a borrower’s flexibility.
For more information about Ziegler’s senior living investment banking practice, please contact one of our experienced team members.