"The CreditWatch placement is based on the expiration of RVM's letter of credit, which was associated with its 2002 debt, as well as its uncertain debt restructuring plans," said Standard & Poor's credit analyst Geraldine Poon. "Other negative credit factors include additional debt that was issued in 2007 and has weakened some debt-related metrics and coverage, as well as the magnitude of debt at Pacific Retirement Services or PRS, the parent organization and sole corporate member of RVM."
RVM's letter of credit (LOC) with JP Morgan expired in December of 2008; JP Morgan now owns the 2002 series bonds. While RVM management is negotiating with a replacement LOC provider for nearly two thirds of the outstanding 2002 series bonds, no commitment is in place. The repayment terms, which are prime plus 200 basis points over five years for the outstanding $66.1 million, begin on Feb. 5, 2009. With regard to the remaining roughly one third of the 2002 series bonds, RVM management is considering different financing options, including paying off this difference with cash as RVM expects additional entry fees (roughly $9 million in 2009) when it completes its new skilled nursing center this year. If a replacement LOC provider is not established, RVM management is considering issuing fixed-rate debt in the next month. Given the uncertainty of a liquidity provider and the possibility that RVM will have to spend down its own liquidity, Standard & Poor's will re-evaluate the situation in the next three months.
The rating remains supported by consistently strong demand, with independent living unit occupancy of 97% and a wait list of more than 500, as well as a broad regional draw beyond its market in southern Oregon; sound liquidity relative to budget; and strong management, including services provided under a management contract by PRS, its parent organization, which has a long operating history.
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Media Contact:
Edward Sweeney, New York (1) 212-438-6643, [email protected]
Analyst Contacts:
Geraldine Poon, San Francisco (1) 415-371-5078
Stephen Infranco, New York (1) 212-438-2025
Key Contacts:
Americas Media Relations: (1) 212-438-6667
media_ [email protected]
Americas Customer Service: (1) 212-438-7280