Sunrise Assisted Living issued $125 million in new convertible bonds last month to pay down $92 million in bank debt that the company used to redeem $150 million in expiring convertible notes. Sunrise received commitments from Credit Suisse First Boston, Wachovia Bank, and FleetBoston Financial for the $92 million term loan while giving investors a 30-day notice regarding the redemption, said Charles Post, senior v.p., corporate strategy and capital markets. The company decided to take advantage of comparatively better pricing with a new convertible deal rather than holding onto the bank debt for future funding.
Post described the convertible notes as a "better instrument" for the company. The term loan was priced at 8.6% all in and was backed by 14 of the company's properties compared to the new unsecured convertible issue which carries a coupon of 5.25%. "The convert is cheaper on the interest rate and it's a seven-year piece of paper," Post said. "It is not secured by anything so those properties become unencumbered again and give us greater flexibility," he added. The $92 million term loan was set to mature in January 2005.
Post asserts the company's banks were satisfied with the modified arrangement. "They had to underwrite the properties. They had to advance money for about 20 minutes and then they got fees on it," he said. The lead banks are among the company's relationship lenders and each participates in some way on the new convertible issue. Post declined to comment on underwriters for the bonds, deals explaining the deal was in the 144A market.