Invesque Inc. Provides Update on Transactions, Refinancings, and Update to Proposed Amendments to the Terms of Convertible Unsecured Subordinated Debentures and the Exchange of Preferred Shares for Common Shares
TORONTO, Oct. 17, 2024 /CNW/ - Invesque Inc. (TSX: IVQ.U) and (TSX: IVQ) (the "Company" or "Invesque") today announced several transaction and refinancing updates, as well as changes to the previously announced proposed amendments to the Company's debentures and preferred share exchange.
Transaction & Refinancing Updates
On September 23, 2024, the Company sold a skilled nursing facility in Illinois for US$16.5 million. Proceeds from the sale were used to reduce borrowings under the KeyBank credit facility. Following the completion of this sale, Invesque owns only two skilled nursing facilities.
On October 15, 2024, the Company sold seven seniors housing assets in Maryland (3), Virginia (3) and Tennessee (1) that were previously managed by Commonwealth Senior Living ("CSL") for US$65.4 million (US$184k per unit). The Company used sale proceeds to pay off the property level mortgage debt associated with the communities, and further reduce borrowings under the KeyBank credit facility by US$6.1 million. The remaining cash in the amount of US$7.8 million was retained by the Company to maintain appropriate liquidity levels.
During the first three quarters of 2024, Invesque has completed nearly US$270.0 million in refinancings, better positioning its balance sheet and current debt maturities. More than US$53.0 million of these refinancings have been on assets previously encumbered by the Company's KeyBank credit facility, under which borrowings have been reduced by over US$100.0 million to date in 2024.
The Company has entered into a definitive agreement to sell its interest in twenty seniors housing assets currently managed by CSL and the Company's interests in the CSL management company. The proposed sale transaction includes pricing above the Company's depreciated book value and after the release of US$222.0 million in mortgage debt, the release of US$58.6 million in preferred equity plus any accrued and unpaid preferred return, and payment of other standard working capital adjustments, will provide cash proceeds which will be used to further reduce borrowings under the KeyBank credit facility and retained to maintain appropriate liquidity levels. Invesque expects this sale to close during the first quarter of 2025, subject to satisfaction or waiver of a due diligence condition in favour of the purchaser and other customary closing conditions. Accordingly, there is no certainty that this transaction will close on the expected timeline or at all.
Update to Proposed Amendments to the Terms of Convertible Unsecured Subordinated Debentures and the Exchange of Preferred Shares for Common Shares
Following the September 17, 2024 press release noting proposed amendments to the Company's 7.00% Convertible Unsecured Subordinated Debentures due January 31, 2025 (the "2025 Debentures") and its 8.75% Convertible Unsecured Subordinated Debentures due September 30, 2026 (the "2026 Debentures"), Invesque has continued discussions with holders of the 2025 Debentures and 2026 Debentures (collectively, the "Debentureholders") and Magnetar Financial LLC ("Magnetar") which resulted in further changes to the proposed deal terms as outlined below.
The updated proposed amendments to the indentures governing the 2025 Debentures and the 2026 Debentures (the "Debenture Amendments"), if approved by the Debentureholders, will provide that:
in exchange for the 2025 Debentures, Debentureholders of 2025 Debentures will receive (i) a pro rata interest of an aggregate principal amount of US$9,938,000 in new unsecured subordinated debentures ("Amended Debentures") and (ii) 52,306,874 common shares of the Company ("Common Shares") having an aggregate value equal to US$8,369,100 based on a price per Common Share of US$0.16; and
in exchange for the 2026 Debentures, Debentureholders of 2026 Debentures will receive (i) a pro rata interest of an aggregate principal amount of US$17,362,000 in Amended Debentures and (ii) 88,210,068 Common Shares having an aggregate value equal to US$14,113,611 based on a price per Common Share of US$0.16 (collectively, the "Debenture Exchange").
In connection with the updates to the Debenture Amendments described above, certain funds (the "Exchanging Magnetar Funds") managed by Magnetar Financial LLC and the Company have also entered into an amendment to the previously executed exchange agreement dated September 16, 2024 (the "Exchange Agreement"), pursuant to which such Exchanging Magnetar Funds have agreed to exchange their class A convertible preferred shares for 716,875,000 Common Shares (the "Preferred Share Exchange"), having a value of US$114,700,000 based on a price per Common Share of US$0.16.
All other terms of the Amended Debentures and the Preferred Share Exchange remain the same as previously outlined by the Company in its September 17, 2024 press release. In connection with the recent discussions relating to the Debenture Amendments, Invesque now has obtained voting support agreements in favor of the Debenture Amendments totaling 54.5% of the outstanding principal amount of 2025 Debentures and 44.4% of the outstanding principal amount of 2026 Debentures. The directors and officers of the Company, as well as the Company's largest holder of Common Shares (holding approximately 31% of the issued and outstanding Common Shares) have each signed a voting support agreement to vote the Common Shares beneficially owned or controlled by them in favour of the Preferred Share Exchange and the issuance of Common Shares pursuant to the Debenture Exchange.
The meetings of holders of each of the 2025 Debentures and the 2026 Debentures to approve the Debenture Amendments (the "Debentureholder Meetings") are scheduled to be held on November 26, 2024 at the offices of the Company at 8701 E. 116th Street, Suite 260, Fishers, Indiana. The record date for determining the Debentureholders entitled to receive notice of and vote at the Debentureholder Meetings is October 25, 2024. Further information and voting instructions with respect to the Debenture Amendments will be outlined in the management information circular of the Company to be sent to Debentureholders in connection with the Debentureholder Meetings, which will also be available on the Company's SEDAR+ profile at www.sedarplus.ca.
The meeting of holders of Common Shares to approve the Preferred Share Exchange and the issuance of Common Shares pursuant to the Debenture Exchange (the "Shareholder Meeting") is scheduled to be held on November 26, 2024 at the offices of the Company at 8701 E. 116th Street, Suite 260, Fishers, Indiana. The record date for determining the holders of Common Shares entitled to receive notice of and vote at the Shareholder Meeting is October 25, 2024. Further information and voting instructions will be outlined in the management information circular of the Company to be sent to holders of Common Shares in connection with the Shareholder Meeting, which will also be available on the Company's SEDAR+ profile at www.sedarplus.ca.
CEO Remarks Adlai Chester, Invesque CEO stated, "I am pleased to highlight the continued execution of our strategy to reduce our overall leverage while retaining a core portfolio of strong cash flowing seniors housing assets. The recent dispositions and the KeyBank paydowns associated with them, as well as several refinancings over the last 120 days, have reduced our leverage point with KeyBank to below 60%, providing additional flexibility for the Company as we continue our path forward."
"The CSL portfolio has been an important part of Invesque's story since it was acquired in August 2019 and the decision to sell this portfolio and our ownership stake in the management company was not an easy one given the alignment with our Company strategy to be seniors housing real estate focused. We believe that the favorable impact to leverage following the sale via the reduction of mortgage debt and release of preferred equity, made for a compelling transaction that was worth pursuing."
Mr. Chester continued, "assuming the closing of all disclosed transactions, the Company will have reduced its leverage to below 50%, which will represent a reduction of over 30% compared to the balance sheet as of June 30, 2024. This substantial reduction is a result of the Company's stated strategy to de-risk and streamline our balance sheet."
About Invesque The Company is a North American health care real estate company with an investment thesis focused on the premise that an aging demographic in North America will continue to utilize health care services in growing proportion to the overall economy. The Company currently capitalizes on this opportunity by investing in a portfolio of income-generating predominantly private pay seniors housing communities. The Company's portfolio includes investments primarily in independent living, assisted living, and memory care, which are operated under long-term leases and joint venture arrangements with industry-leading operating partners. The Company's portfolio also includes investments in owner-occupied seniors housing properties in which the Company owns the real estate, the licensed operations, and provides management services through Commonwealth Senior Living, LLC, a Delaware limited liability company. For more information, please visit www.invesque.com.
Forward-Looking Information This press release (this "Press Release") contains certain forward-looking information and/or statements ("forward-looking statements"), that reflect and are provided for the purpose of presenting information about management's current expectations and plans relating to the future, including, without limitation, statements regarding the Company's utilization of proceeds of dispositions, statements regarding the closing of the sale of certain seniors housing communities, and statements regarding the Debenture Amendments, the Debenture Exchange and the Preferred Share Exchange. Forward-looking statements is typically identified by terms such as "anticipate," "believe," "continue," "expect," "expectations," "look," "may," "plan," "project," "should," "will," and other similar expressions that do not relate solely to historical matters and suggest future outcomes or events. Readers should not place undue reliance on forward-looking statements and are cautioned that forward-looking statements may not be appropriate for other purposes. Forward-looking statements in this Press Release are based on current beliefs, expectations, and certain assumptions of the Company's management, including assumptions regarding the Company's ability to complete the Debenture Amendments, the Debenture Exchange, the Preferred Share Exchange and the proposed asset sales and that existing trends being observed by the Company's seniors housing operating partners will continue. Forward-looking statements in this Press Release are subject to significant known and unknown risks, uncertainties, and other factors that are beyond the Company's ability to predict or control, and may cause actual results or events to differ materially from those expressed or implied by such statements and, accordingly, should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not such results will be achieved.
Such risks include the risk that the Debenture Amendments will not be approved by Debentureholders or that the issuance of Common Shares pursuant to the Preferred Share Exchange and the Debenture Exchange will not be approved by shareholders or by the Toronto Stock Exchange, the closing conditions to the Debenture Amendments, the Debenture Exchange, the Preferred Share Exchange and/or the proposed asset sales, as applicable, will not be satisfied or waived, and that existing trends being observed by the Company's seniors housing operating partners will not continue. The forward-looking statements in this press release are also subject to the risks described in the Company's current annual information form and management's discussion and analysis, available on SEDAR+ at www.sedarplus.ca, which risks may be dependent on market factors and not entirely within the Company's control. Although management believes that it has a reasonable basis for the expectations reflected in these forward-looking statements, actual results may differ from those suggested by the forward-looking statements for various reasons. These forward-looking statements reflect current expectations of the Company as of the date of this Press Release and speak only as of the date of this Press Release. The Company does not undertake any obligation to publicly update or revise any forward-looking statements except as may be required by applicable law.
There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to place undue reliance on any such forward-looking statements, which are given as of the date hereof, and not to use such forward-looking statements for anything other than the intended purpose. Further, except as expressly required by applicable law, the Company assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements contained in this Press Release are expressly qualified by this cautionary statement.
