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Communities

Capital Senior Living Proposals, Amended Investment Agreement Receive Backing of Advisory Firm ISS

October 11, 2021

Capital Senior Living Corporation (“Capital Senior Living” or the “Company”) (NYSE: CSU), a leading owner-operator of senior living communities across the United States, today announced that leading proxy advisory firm Institutional Shareholder Services (“ISS”) has recommended that shareholders vote FOR all of the Company’s proposals, including the Company’s previously announced amended investment agreement with Conversant Capital (“Conversant”) to raise up to $154.8 million, at the Special Meeting of Stockholders on October 22, 2021.

In its report, ISS emphasized that “the financing is necessary and urgent,” highlighting, among other things, that:

  • “The company appears to have its back against the wall, with a high level of leverage coupled with a large amount of pending debt maturities over the next 12 months, which raises substantial doubt about its ability to remain a going concern in light of insufficient cash on hand or projected free cash flows to repay its upcoming debt maturities.”
  • “The proposed transaction will provide CSU the capital necessary to address all of its pending near-term outstanding debt maturities, improve its balance sheet and leverage profile, fund its working capital and operating deficits, provide additional capital for capital expenditures, and provide a capital buffer to be used for potential acquisitions or as a cushion in the case of a prolonged negative impact from the COVID-19 pandemic.”
  • “While the company has begun to show signs of a recovery, occupancy levels and operational performance have not yet returned to pre-COVID-19 levels and significant uncertainty remains regarding the timing of a full recovery.”
  • “Despite the concerns raised by the dissident, the process appears to have been thorough, with two discrete processes run over the last two years to identify potential capital providers.”

ISS also agreed that the Amended Transactions “provide[] certainty of capital that neither Ortelius nor Invictus can offer at this time.” ISS noted, among other things, that “Invictus’ proposal is still subject to due diligence and Invictus has estimated a Jan. 31, 2022 closing date, which is one month after the Dec. 31, 2021 maturity date of the company’s $40.5 million loan with Fifth Third.” ISS further recognized that “the Invictus offer consists entirely of debt as compared to approximately 75 percent common equity in the Conversant deal (excluding the equity accordion and warrants), and does not improve the company’s overall leverage position.”

Lastly, ISS noted that “the timing of (Invictus’) proposal at this late date, just over two weeks before the special meeting, may cause shareholders to question why Invictus hadn’t come forward earlier.”

On behalf of the Capital Senior Living Board of Directors, Chief Executive Officer and Director Kimberly S. Lody stated, “The ISS recommendation further confirms that the Amended Transactions are in the best interests of shareholders and necessary to the future of the Company. By voting FOR, shareholders are supporting a sustainable future for the Company that will allow us to address our immediate liquidity concerns and position Capital Senior Living for success and increased shareholder value.”

ISS also recommended shareholders vote FOR the proposal to increase the number of authorized shares of common stock (Proposal 2), FOR the Company’s amended omnibus stock plan (Proposal 3), FOR the issuance of shares to Arbiter Partners (Proposal 4), and FOR the Board’s ability to adjourn the Special Meeting if there are insufficient votes present (Proposal 5).

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