Ask the legal expert: What are the top legal ramifications for loan workouts and defaults for seniors care providers?

Share this article:
Attorney John Durso, Ungaretti & Harris LLP
Attorney John Durso, Ungaretti & Harris LLP
What are the top legal ramifications of loan workouts and defaults for senior care providers?Many senior living providers have struggled with their operations as prospective residents delay moving into communities because they are unable to sell their homes or are faced with significant declines in their net worth due to declines in housing values and the stock market.

The adverse impact on operations might also prevent providers from meeting all their obligations under agreements with bondholders or banks. Violations of operating covenants are becoming more common.

Bondholders and banks view violations of these operating covenants as an early warning of more serious problems ahead. These people will certainly want assurances that management is proactively working to address deficiencies in operations.

When a covenant is missed, the financing agreement must be reviewed carefully to determine the consequences. In some cases, noncompliance does not mean a default, so long as the provider retains a consultant to review operations and the provider's board of directors and management follow the recommendations of the consultant to the extent feasible.

If failure to meet an operating covenant results in a default, the provider will seek a waiver. In return, new operating covenants may be negotiated but with less latitude for management if future violations occur.
Share this article:

More in News

Also in the news for Sept. 22, 2014

ER support program can reduce hospital admissions among seniors, study says ... Researchers find defect that may lead to Alzheimer's ... Technical glitch may cause milions in payment delays for physicians who adopted EHRs

Enterovirus hits KY nursing home

Nine residents at the Heritage Hall nursing home are confirmed to have a strain of enterovirus, according to local reports.

AHCA applauds Senate passage of IMPACT Act

The Senate approved the Improving Medicare Post-Acute Care Transformation Act, drawing praise from the American Health Care Association and the National Association for the Support of Long Term Care.