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Notes Payable and Other Debt (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of Notes Payable and Other Debt

Notes payable and other debt consists of the following:

	December 31,
Amounts in (000’s)	2018			2017
Senior debt—guaranteed by HUD	$	32,857		$	33,685
Senior debt—guaranteed by USDA ^(a)		13,727			20,320
Senior debt—guaranteed by SBA ^(b)		668			2,210
Senior debt—bonds		6,960			7,055
Senior debt—other mortgage indebtedness		28,139			9,486
Other debt		664			1,050
Convertible debt		—			1,500
Sub Total		83,015			75,306
Deferred financing costs		(1,535	)		(2,027	)
Unamortized discounts on bonds		(167	)		(177	)
Total		81,313			73,102
Less current portion		26,397			8,090
Notes payable and other debt, net of current portion	$	54,916		$	65,012

^(a)	U.S. Department of Agriculture (“USDA”)

^(b)	U.S. Small Business Administration (“SBA”)

The following is a detailed listing of the debt facilities that comprise each of the above categories:

(Amounts in 000’s)
Facility	Lender	Maturity	Interest Rate ^(a)			December 31, 2018		December 31, 2017
Senior debt - guaranteed by HUD ^(b)
The Pavilion Care Center	Red Mortgage	12/01/2027	Fixed	4.16	%	$	1,219	$	1,329
Hearth and Care of Greenfield	Red Mortgage	08/01/2038	Fixed	4.20	%		2,061		2,127
Woodland Manor	Midland State Bank	10/01/2044	Fixed	3.75	%		5,216		5,334
Glenvue	Midland State Bank	10/01/2044	Fixed	3.75	%		8,099		8,283
Autumn Breeze	KeyBank	01/01/2045	Fixed	3.65	%		7,041		7,199
Georgetown	Midland State Bank	10/01/2046	Fixed	2.98	%		3,564		3,644
Sumter Valley	Key Bank	01/01/2047	Fixed	3.70	%		5,657		5,769
Total						$	32,857	$	33,685
Senior debt - guaranteed by USDA^(c)
Attalla ^(e)	Metro City	09/30/2035	Prime + 1.50%	5.50	%	$	—	$	6,169
Coosa	Metro City	09/30/2035	Prime + 1.50%	6.75	%		5,388		5,562
Mountain Trace	Community B&T	01/24/2036	Prime + 1.75%	7.00	%		4,135		4,260
Southland	Bank of Atlanta	07/27/2036	Prime + 1.50%	6.75	%		4,204		4,329
Total						$	13,727	$	20,320
Senior debt - guaranteed by SBA ^(d)
College Park^(e)	CDC	10/01/2031	Fixed	2.81	%	$	—	$	1,523
Southland	Bank of Atlanta	07/27/2036	Prime + 2.25%	7.50	%		668		687
Total						$	668	$	2,210

^(a)	Represents interest rates as of December 31, 2018 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs which range from 0.08% to 0.53% per annum.

^(b)

For the seven skilled nursing facilities, the Company has term loans insured 100% by HUD with financial institutions. The loans are secured by, among other things, an assignment of all rents paid under any existing or future leases and rental agreements with respect to the underlying facility. The loans contain customary events of default, including fraud or material misrepresentations or material omission, the commencement of a forfeiture action or proceeding, failure to make required payments, and failure to perform or comply with certain agreements. Upon the occurrence of certain events of default, the lenders may, after receiving the prior written approval of HUD, terminate the loans and all amounts under the loans will become immediately due and payable. In connection with entering into loans, the facilities entered into a healthcare regulatory agreement and a promissory note, each containing customary terms and conditions.

^(c)

For the four skilled nursing facilities, the Company has term loans with financial institutions, which are insured 70% to 80% by the USDA. The loans have an annual renewal fee for the USDA guarantee of 0.25% of the guaranteed portion. The loans have prepayment penalties of 2% to 3% through 2018, which declines 1% each year capped at 1% for the remainder of the first 10 years of the term and 0% thereafter.

^(d)	For each of the two facilities, the Company has a term loan with a financial institution, which is insured 75% by the SBA. The notes mature at various dates starting in 2031 through 2036.

^(e)	On February 15, 2018, the Company repaid these loans with proceeds from the Pinecone Credit Facility.

(Amounts in 000’s)
Facility	Lender	Maturity	Interest Rate ^(a)			December 31, 2018		December 31, 2017
Senior debt - bonds^(b)
Eaglewood Bonds Series A^(c)	City of Springfield, Ohio	05/01/2042	Fixed	7.65	%	$	6,610	$	6,610
Eaglewood Bonds Series B^(c)	City of Springfield, Ohio	05/01/2021	Fixed	8.50	%		350		445
Total						$	6,960	$	7,055

^(a)	Represents interest rates as of December 31, 2018 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs of approximately 0.26% per annum.

^(b)

In April 2012, a wholly-owned subsidiary of the Company entered into a loan agreement with the City of Springfield, Ohio pursuant to which City of Springfield lent to such subsidiary the proceeds from the sale of City of Springfield’s Series 2012 Bonds. The Series 2012 Bonds consist of $6.6 million in Series 2012A First Mortgage Revenue Bonds and $0.6 million in Taxable Series 2012B First Mortgage Revenue Bonds. The bonds are secured by the Company’s assisted living facility located in Springfield, Ohio known as Eaglewood Village and guaranteed by Regional Health. There is an original issue discount of $0.3 million related to this loan.

^(c)	On January 18, 2019, the principal on the bonds was reduced in aggregate by $0.2 million, see Note 19 – Subsequent Events.

(Amounts in 000’s)
Facility	Lender	Maturity	Interest Rate ^(a)			December 31, 2018		December 31, 2017
Senior debt - other mortgage indebtedness
Quail Creek ^(c)	Congressional Bank	06/30/2019	LIBOR + 4.75%	7.10	%	$	4,059	$	4,314
Northwest ^(d)	First Commercial	07/31/2020	Prime	5.00	%		—		1,122
Meadowood ^(e)	Exchange Bank of Alabama	05/01/2022	Fixed	4.50	%		3,918		4,050
College Park	Pinecone ^(b)	8/15/2020	Fixed	13.50	%		2,846		—
Northwest	Pinecone ^(b)	8/15/2020	Fixed	13.50	%		2,803		—
Attalla	Pinecone ^(b)	8/15/2020	Fixed	13.50	%		9,089		—
Adcare Property Holdings	Pinecone ^(b)	8/15/2020	Fixed	13.50	%		5,424		—
Total						$	28,139	$	9,486

^(a)

Represents interest rates as of December 31, 2018 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs which range from 0.09% to 1.49% per annum and excludes certain finance fee’s (described further under the “Pinecone Credit Facility” below in this Note).

^(b)

On February 15, 2018, the Company entered into the Pinecone Credit Facility with Pinecone. On December 31, 2018, the Company entered into the A&R New Forbearance Agreement, which provided for certain amendments to the Pinecone Credit Facility (for further information see, “Pinecone Credit Facility” below in this Note).

^(c)	On April 30, 2019, the Company extended the maturity date of the Quail Creek Credit Facility to June 30, 2019, with an option to further extend to July 31, 2019, at the lenders discretion (see Note 19 – Subsequent Events).

^(d)	On February 15, 2018, the Company repaid this loan with proceeds from the Pinecone Credit Facility.

^(e)

On May 1, 2017, in connection with the Company’s acquisition of the Meadowood Facility, a wholly-owned subsidiary of the Company entered into a Loan Agreement (the “Meadowood Credit Facility”) with the Exchange Bank of Alabama, which provides for a $4.1 million principal amount secured credit facility maturing on May 1, 2022. The Meadowood Credit Facility is secured by the Meadowood Facility.

(Amounts in 000’s)
Lender	Maturity	Interest Rate			December 31, 2018		December 31, 2017
Other debt
First Insurance Funding	03/01/2019	Fixed	4.24	%	$	20	$	20
KeyBank	08/02/2019	Fixed	0.00	%		495		495
McBride Note ^(a)	09/30/2019	Fixed	4.00	%		115		264
Pharmacy Care of Arkansas	02/08/2018	Fixed	2.00	%		—		42
South Carolina Department of Health & Human Services ^(b)	02/24/2019	Fixed	5.75	%		34		229
Total					$	664	$	1,050

^(a)	The Company executed an unsecured promissory note in favor of William McBride III, the Company’s former Chairman and Chief Executive Officer, pursuant to a settlement agreement dated September 26, 2017, between Mr. McBride and the Company, see Note 18 Related Party Transactions “McBride Matters”.

^(b)

On February 21, 2017, the South Carolina Department of Health and Human Services (“SCHHS”) issued fiscal year 2013 Medicaid audit reports for two facilities operated by the Company during 2013. In its fiscal year 2013 Medicaid audit reports, SCHHS determined that the Company owed an aggregate $0.4 million related to patient-care related payments made by SCHHS during 2013. Repayment of the $0.4 million began on March 24, 2017 in the form of a two-year note bearing interest of 5.75% per annum.

(Amounts in 000’s)
Facility	Conversion price		Maturity	Interest Rate			December 31, 2018		December 31, 2017
Convertible debt
Issued July 2012 ^(a)	$	4.25	04/30/2018	Fixed	14.00	%	$	—	$	1,500
Total							$	—	$	1,500

^(a)

On February 15, 2018, the Company repaid the outstanding principal balance to Cantone Asset Management, LLC, together with accrued interest thereon, with proceeds from the Pinecone Credit Facility. Approximately $0.03 million of deferred financing was recorded in “Current portion of convertible debt, net” on the Company’s consolidated balance sheets at December 31, 2017.

Summary of Credit Related Instruments Not In Compliance

The table below indicates which of the Company’s credit-related instruments were not in compliance as of December 31, 2018.

Credit Facility ⁽¹⁾	Balance (000’s)		Subsidiary or Operator Level Covenant Requirement	Financial Covenant	Measurement Period	Min/Max Financial Covenant Required		Financial Covenant Metric Achieved		Future Financial Covenant Metric Required
Pinecone Credit Facility	$	20,162	Borrower	Minimum borrower fixed charge coverage ratio	Quarterly	1.2		1.1			1.2
Mountain Trace	$	4,135	Borrower	Minimum debt service coverage ratio	Annual		1.0		-0.1		1.0
Senior debt - bonds	$	6,960	Borrower	Minimum debt service coverage ratio	Annual		1.3		-0.5		1.3

⁽¹⁾	Waiver, amendment or other cure provision for violation of covenant obtained. For further information, see Note 3 – Liquidity.

Summary of the Scheduled Maturities

The schedule below summarizes the scheduled gross maturities as of December 31, 2018 for each of the next five years and thereafter.

	Amounts in (000’s)
2019 ⁽¹⁾	$	26,436
2020		1,636
2021		1,721
2022		5,131
2023		1,741
Thereafter		46,350
Subtotal		83,015
Less: unamortized discounts		(167	)
Less: deferred financing costs		(1,535	)
Total notes and other debt	$	81,313

⁽¹⁾

Includes the Pinecone Credit Facility with a maturity date of August 15, 2020. Pursuant to the Second A&R Forbearance Agreement which commenced on March 29, 2019 and may extend as late as October 1, 2019, Pinecone agreed to forbear from exercising its default-related rights and remedies (including the acceleration of the outstanding loans and charging interest at the specified default rate), unless the forbearance period is earlier terminated as a result of specified termination events, including a default or event of default under the Loan Agreement (other than any Specified Defaults) or any failure by the Company or its subsidiaries to comply with the terms of the Second A&R Forbearance Agreement, including, without limitation, the Company’s obligation to progress with an Asset Sale in accordance with the timeline specified therein Additionally excludes approximately $0.2 million principal repayment as a result of a refund of issuance fees, see Note 19 – Subsequent Events.