Following a delay of almost a month, US company Chosen Healthcare will today attempt a bond issue on the Tel Aviv Stock Exchange (TASE). The company will try to raise $135 million in order to repay an $86 million bank loan and make an $11 million loan to the owners of the company: CEO Moshe Orlinsky and CFO Jay Orlinsky. The proceeds and the company's regular cash flow will also be used to pay a regular $3-4 million dividend. The controlling shareholders have also given US banks an $18 million personal guarantee, and they plan to use the proceeds to eliminate this guarantee.
Apex Issuances, which led Urbancorp's NIS 180 million bond issue on the TASE, will lead Chosen Healthcare's issue. Urbancorp failed almost immediately after its issue.
Chosen Healthcare is registered in the British Virgin Islands. It deals in income-producing real estate, specializing in the protected housing and leasing of nursing homes sectors.
The company is seeking to raise straight bonds, which have a BBB rating. The lien on the bonds is a senior lien through a mortgage on income-producing properties with an alleged $220 million value. The bonds have a four-year duration, and the interest rate will be set in an auction. Market sources estimated that, given the company's size and bond rating, the shekel interest rate would be around 7%, which is very high, given the security it is providing for the issue.
The principle of the bonds is to be repaid in three equal payments in March 2021, March 2022, and March 2023. Interest will be paid twice a year in 2018-2023.
Chosen Healthcare holds 22 properties leased to Moshe and Jay Orlinsky, who operate senior citizens' homes and protected housing on the premises. A large proportion of the tenants in these facilities receive US federal government aid, a fact that is liable to constitute a risk, given the administration's intention to reduce the extent of aid to poor (Medicare and Medicaid).
The company reports that its first-quarter results reflect an annualized $17.7 million net profit, with $9.7 million in retained cash flow, an $86 million debt, and $17 million in EBITDA.
The properties, currently valued at $220 million, were purchased in late 2014 and last 2015 for $85 million. The book value for them appears odd, given the fact that a mere 30 months have passed since they were acquired.
Published by Globes [online], Israel Business News - www.globes-online.com - on September 3, 2017
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