Sonida Raises $47.8M in Equity to Fund Discounted Debt

by Jeff Shaw

DALLAS — Sonida Senior Living Inc. (NYSE: SNDA), a Dallas-based owner-operator of communities and services for seniors, has executed a $47.8 million equity private placement, including an investment from Conversant Capital, the company’s largest shareholder. 

Sonida plans to use this new capital for the completion of its balance sheet repositioning, continued investments in community improvements, broader community programming and acquisition opportunities.

The shares were issued at $9.50 per share, a 5 percent premium to the 30-day volume weighted average price prior to closing. The equity private placement will close in two tranches. The first tranche of $32 million closed on Feb, 1, and the second tranche of $16 million will close on or around March 31, subject to shareholder approval of an increase to the company’s authorized shares of common stock. The holders of a majority of the company’s voting securities have agreed to vote in favor of such an increase.

“In an economic environment characterized by limited capital and available financing for senior living assets, we believe this transaction reflects our investors’ confidence in Sonida as a premium long-term investment and operating platform with significant upside potential,” says Brandon Ribar, president and CEO. 

“Since Conversant made its original investment in Sonida in November 2021, we’ve been working diligently with the management team along three key initiatives — improving operations, strengthening the balance sheet and growing the business,” adds Michael Simanovsky, founder and managing partner at Conversant. “Today’s transaction allows us to shift the company’s focus towards the third initiative: accelerating the growth of the business. As counter-cyclical investors, we are very excited about the company’s increasingly active pipeline of acquisitions and look forward to partnering with banks and other asset owners as we continue to grow Sonida’s operating platform.”

Sonida has used a portion of the proceeds to purchase all seven of the remaining loans held by Protective Life, which was completed on Feb. 2. The $40.2 million purchase price represents 52 percent of the outstanding Protective Life indebtedness of $77.4 million. The debt purchase has been financed with $24.8 million of mortgage debt provided by Ally Bank, currently Sonida’s second-largest lending partner, through an expansion of the company’s existing Ally Bank term loan. 

“This transaction significantly strengthens the company’s balance sheet, reducing total indebtedness by $52.6 million, or 9 percent, and annual debt service costs by approximately $3.2 million,” according to a press release from Sonida. “After completing these transactions, the company’s indebtedness was $580.7 million as of Feb. 2. The company’s debt has a weighted-average remaining term of 3.7 years, with only $31.8 million maturing prior to December 2026. Finally, 92 percent of the Company’s outstanding debt is interest only through 2026.”

“This capital infusion, coupled with the steady, foundational margin improvements achieved over the past 12 months, allows the company to further focus on revenue-driving and margin-enhancing efforts and laying the groundwork for operational scalability as we look to grow the portfolio,” says Kevin Detz, Chief Financial Officer.

Specific planned capital expenditure projects include conversions of existing apartments to Magnolia Trails memory care units and the opening of additional wings within highly occupied communities. The company has also budgeted to accelerate the deployment of recently introduced technology that has improved operating efficiencies, quality of care and resident experience.

After considering the equity capital for the Protective Life debt purchase and the planned capital expenditure projects, Sonida will have approximately $25 million of equity capital available for acquisitions and working capital purposes. The company is engaged in advanced discussions with a private equity sponsor to acquire a majority interest in a four-asset portfolio, with three of the assets reinforcing Sonida’s Texas footprint.

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