Philly's Baptist Home defaults on $24 million: Update

UPDATED with additional comment and explanation on Baptist Home of Philadelphia's bond default.

"Deer Meadows Retirement Community is not closing nor are we going out of business nor are we going to be taken over nor are we selling," despite late payments for four months earlier this year on the Baptist nursing home's $27.5 million in bond debt, says Lisa Sofia, president and CEO of the Baptist nursing home in Northeast Philly.

Sofia blamed the default and late payments on last fall's cut in Medicare reimbursements, the nationwide decline in home values that has made it difficult for some patients to pay for their care at the 332-bed skilled-nursing and residential complex, and other pressures.

After she was promoted to chief executive in January, Sofia says she was forced to lay off 30 of the 300-member staff, including office workers; bond trustees applied debt-reserve funds to make the delayed bond payments. Sofia says she's working to assure lenders led by U.S. Bancorp that a plan to pay down bank debt with the cost savings and reduced losses is in place.

"All our (bondholders) have now been paid up to date," principal and interest, "to which they were entitled, she added.  Bondholders for the fixed- and floating-rate bonds, first issued in 1998, include Invesco Ltd. and Oppenheimer Funds, according to SEC filings.

"We have been working closely with our bankers and our investors," Sofia said. "It's going to take us a little time. We're like a lot of other businesses who find themselves having some challenges." 

The bonds, which funded expansion and renovation of the facilities, were issued through the partly city-run Philadelphia Authority for Industrial Development, but it's up to Baptist to pay back what it borrowed and the bonds are not city-guaranteed, John Grady, boss at the Philadelphia Industrial Development Corp., which runs PAID, told me.

Bapitst was one of three U.S. municipal-bond "first-time defaulters" that issued impairment notices this month, acknowledging they hadn't paid investors on schedule, Municipal Market Advisors reported in an investor note yesterday.