Senior housing leads new wave of bond defaults

LONDON: Seniors housing today leads the published list of bond defaults. There have been twenty-seven this year.

Municipal bond defaults are climbing in 2021 — and the senior housing sector is at the top of the pile, according to an Oct. 6 analysis from market research firm Municipal Market Analytics.

For the full year of 2021, the firm has so far recorded 47 first-time payment defaults, representing about $2.4 billion in credit. More than half (27) of the defaults were linked to senior housing communities, which is listed as a “risky” sector for credit along with hospitals, student housing, jails and higher education.

The senior housing industry saw far more defaults than the other categories listed, such as industrial development bonds, which are linked to six defaults in 2021 so far; and charter schools, which are related to four defaults.

This is the second year in a row in which senior housing communities recorded high levels of defaults. For the full year of 2020, senior housing communities accounted for 31 defaults tracked by Municipal Market Analytics.

The report suggests that there is still underlying pain in the senior housing industry despite recent gains in occupancy for much of the industry. The report also shows that first-time payment defaults have risen since 2018, when Municipal Market Analytics tracked 46 defaults. The following year, defaults hit 55, before leaping up to 88 in 2020.

“The slowest fourth quarter defaults total since 2009 was 14 — registered three times in 2014, 2017, and 2018 — suggesting that 2021 will see at least 13 more defaults by 12/31,” the Municipal Market Analytics report reads.

The growing number of municipal defaults is a sign that credit conditions are poised to worsen in the months ahead, according to financial news publication MarketWatch.

The senior housing industry has struggled this year with bond-related issues. In June, a Houston-based continuing care retirement community (CCRC) filed for Chapter 11 bankruptcy protection, aiming to restructure $140.3 million in bond debt. Earlier that same month, a CCRC on Long Island filed for pre-negotiated Chapter 11 bankruptcy protection with a goal of restructuring $199.5 million in bond debt.