Sunrise Gets Much Needed Reprieve

April 29, 2009

April 29, 2009
Two days before the April 30, 2009 deadline of the last amendment to their credit agreement, Sunrise Senior Living announced the 12th, and hopefully final, amendment to the credit agreement, and this one will last until December 2, 2009, as opposed to the various 30-day extensions of the recent past. In addition to eliminating virtually all financial covenants, many of which became somewhat meaningless anyway, this 12th amendment also relieves the lenders and letter of credit issuers from advancing any additional funds to any Sunrise entities between now and the December 2 maturity date. As of April 27, outstanding borrowings were $72.7 million under the bank credit facility and $24.5 million of letters of credit.

In essence, this gives Sunrise some breathing room until the end of the year to sort out its other financial problems, which are not inconsiderable. The good news is that with this 12th amendment, the likelihood of a Chapter 11 bankruptcy filing is significantly reduced, at least in the near term. With seven months to go until maturity, there may now be sufficient time to raise additional capital through the sale of minority ownerships interests in many of their properties and through the voluntary relinquishment of management contracts (such as those with HCP Inc.). Investors obviously liked the news, sending Sunrise's shares up by 77% in morning trading to $1.84 per share, on volume of 2.4 million shares, before dropping back slightly. There is still much work to do, however.

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