Invictus Global Management Provides Capital Senior Living with Detailed Terms for a Market-Based, Alternative Financing Transaction

[ad_1]

“Invictus stands ready, willing and able to provide capital to the CSU on terms that reflect the company’s high quality asset base, the strength of the underlying business and the priority that should be given to existing shareholders,” said Amit Patel, Partner, Invictus. “The Conversant transaction, in contrast, contains monstrous conditions that are completely alien to the market, are highly dilutive and damaging to the value of the shareholders. We strongly doubt that shareholders will support these terms. Capital to the CSU on the terms set out in today’s letter and term sheets and we will wholeheartedly welcome the participation of our fellow shareholders. ”

The full text of the Invictus letter is reproduced below:

October 5, 2021

MS. Kimberly ice cream
President and Chief Executive Officer
Capital Senior Living Corporation
14160 Dallas Parkway
Suite 300
Dallas, TX 75254

Subject: Alternative Financing on Market Terms

Dear Mrs. Lody:

I am writing on behalf of Invictus Global Management, LLC (along with its affiliates, “Invictus”) a major common stockholder of Capital Senior Living Corporation (“CSU” or the “Company”) (NYSE: CSU).

Invictus is a private equity firm with a focus on special situations and private credit. I founded the company with my partner, Cindy Chen DelanoAfter gaining over 40 years of collective experience investing in complex capital structures and unique situations. Invictus prides itself on having strong relationships with its sources of capital, including leading investors such as Corbin Capital Partners, a $ 9 billion institutional investor based in new York.

We own the CSU because we believe the company has significant opportunities to create value from its world-class asset base. With the help of a leading industry expert who is familiar with the company’s assets and operations, we conducted a thorough review and came to the conclusion that CSU has a very viable, even exciting, business with valuable assets on its balance sheet. Less than a month ago, CSU announced the sixth straight month of occupancy growth backed by robust leading indicators such as leads and inflows, and we are confident the company is well positioned to benefit from the post-pandemic recovery.

Hence, we were surprised when the company committed to financing through Conversant Capital LLC, which was more in line with the financing transactions we see for hard-hit companies. Given the onerous terms of the transaction, we are not surprised that shareholders revolted. And frankly, while the recently revised deal is better for shareholders, given the high quality asset base and strength of the CSU’s underlying business, it is still out of the market and far from what shareholders deserve.

We acknowledge that two major shareholders, both of whom receive special treatment – including backstop fees, reimbursement and board representation – supported the Conversant transaction. However, it appears that their support was motivated or even conditioned by their particular treatment. What about the rest of your shareholders who are not receiving excessive board influence and outrageous fees? In our opinion, the conversant transaction remains suboptimal for them.

We have publicly signaled our willingness to offer an alternative to the conversant transaction – one of the same size, significantly cheaper for the company and more conventional in terms of its terms. We were surprised that you didn’t try to find out more about our proposal even though you were negotiating changes to the transaction with Conversant.

We do not believe that shareholders will endorse your amended transaction with Conversant. And if they refuse at the special meeting, we are ready to make capital available to the company in the short term on significantly more favorable terms for the company and all of its shareholders.

Among other things, we believe that common shareholders should continue to elect directors so that the company can be run to the benefit of all shareholders – not just those who have privately negotiated special treatment. Our proposal is to include only one Director selected by Invictus, but would otherwise leave the composition of the Board of Directors to the discretion of its shareholders.

For the financing itself, we propose $ 150 million Capital injections that would be used to significantly extend the maturities of the company’s debt so the company could continue its post-pandemic recovery and facilitate future growth. In particular, we propose:

• When the conversant transaction ends, an immediate $ 25 million Injected liquidity in the form of secured debt (the “Invictus Bridge Loan”) that would be used to refinance the Conversant Bridge Loan and to provide working capital. This capital would be made available without further diligence or the need for a shareholder vote. The interest would have to be paid in cash or in kind in the amount of 10% or 12% with a one-year term and a structuring fee of 3%.
• A $ 75 million Senior Secured Loan (the “Invictus Loan”) upon completion of property valuations that are satisfactory to us and confirmation of a loan-to-value ratio of no more than 75%. We believe that the review process should take no longer than two weeks, and we have a high level of confidence that the valuations will assign values ​​to your properties that are equal to or greater than those that we have assigned after our extensive due diligence. The Invictus term loan would have a term of five years and a variable interest rate of LIBOR plus 800 basis points for cash payments and LIBOR plus 1000 basis points for payments in kind with a structuring fee of 3%. The Invictus loan would be secured by an initial lien on all unencumbered collateral and a subordinate lien on all encumbered collateral and would be used to refinance the company’s existing BBVA and Fifth Third Bank loans.
• $ 75 million of Junior Lien convertible bonds (the “Convertible Bonds”) with a term of six years and a conversion price of $ 40.00 per share with an interest rate of 8%, payable in cash or in kind at the option of the company. The convertible bonds would be secured by a subordinate lien on all fixed-term loan collateral. Invictus would support the entire convertible bond issue and is fully prepared and able to fund the entire issue $ 75 million ourselves. However, we openly welcome other shareholders to participate in the backstop and earn a proportion of the backstop fee. It is important that we ensure that every shareholder also has the right to buy at least a proportionate share of the convertible bonds pari passu. The company is owned by its shareholders and they should have the right to provide additional capital to the company if necessary.

For each of these funding instruments, I have included comprehensive term sheets that have been reviewed by our external lawyers and advisors. I think you will find comfort in the minimal, customary, closing conditions. We have limited confirmatory due diligence (mainly valuations of some properties) and usual documentation requirements. The shareholders will be asked for their support at an extraordinary shareholders’ meeting. Nothing stands in the way of the company’s raising of capital on terms that are far better for the company and all of its shareholders than those offered by Conversant.

After the conversant transaction is complete, Invictus is ready to send the $ 25 million Invictus Bridge Loan, subject only to customary and acceptable final documentation, which should not take longer than seven days to negotiate and prepare. We are then ready to move quickly to the $ 150 million longer term funding, part of which would replace the Invictus bridge loan, and believe the full package could be in place sooner 31 January.

As shareholders, we are deeply disappointed with the Board-approved transaction. We do not believe this will maximize value for business owners. As experts in the structuring of complex financing, we are encouraged by the possibility of providing the promising company CSU with capital on terms that are far superior to those of the conversant deal.

We acknowledge that you have agreed to restrict yourself and cannot speak to us about our proposed transaction, so we do not expect an immediate response. However, we are confident that the CSU shareholders will reject the Conversant deal and that you will then be able to get in touch with us. We look forward to speaking to you and providing the company with the financing it deserves.

Sincere,

// S //

Amit Patel
partner

About Invictus Global Management
Invictus is a Austin-based private equity fund with a focus on special situations and private credit.

Investor and media contact:
Amit Patel
[email protected]

SOURCE Invictus Global Management, LLC

[ad_2]