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EXHIBIT 99.1
ElderTrust(TM)
A Healthcare Real Estate 101 East State Street
Investment Trust Suite 100
Kennett Square, PA 19348
T 888.234.REIT
T 610.925.4200
F 610.925.4351
Contact: D. Lee McCreary, Jr.
President and Chief Executive Officer
(610) 925-4200
ElderTrust Addresses Chapter 11 Bankruptcy Filings by Genesis and Multicare
and their Subsidiaries; Expects Significant Accounting Charges and Expects a
Significant Reduction or Suspension of Shareholder Distributions;
and Notes Events of Default under Existing Indebtedness
Kennett Square, PA, (June 23, 2000) - ElderTrust (NYSE:ETT), an equity
healthcare REIT, today announced that it had begun the process of assessing the
impact on ElderTrust of yesterday's Chapter 11 bankruptcy filings by Genesis
Health Ventures, Inc. (NYSE:GHV), The Multicare Companies, Inc., a 43.6% owned
consolidated subsidiary of Genesis, and their subsidiaries. The Genesis and
Multicare bankruptcy filings follow debt restructuring discussions between those
entities and their senior lenders.
Approximately 70% of ElderTrust's consolidated assets at March 31, 2000
consisted of real estate properties leased to or managed by subsidiaries of
Genesis and loans on real estate properties made to consolidated and
unconsolidated subsidiaries of Genesis or Multicare. Revenues recorded by
ElderTrust in connection with these leases and loans totaled $4.7 million, or
67% of ElderTrust's total revenues, for the quarter ended March 31, 2000. In
addition, unconsolidated entities of ElderTrust, in which ElderTrust had
investments in and advances to totaling $18 million at March 31, 2000, also
lease properties to these entities and recognized revenues of $3.2 million for
the same period.
Included in ElderTrust's consolidated assets at March 31, 2000 are approximately
$20 million in secured loans outstanding to subsidiaries of Multicare (with a
weighted average annual interest rate of 10.5%), 20% of the principal balance of
which is guaranteed by Multicare. ElderTrust also has approximately $20 million
in loans to subsidiaries of Genesis (with a weighted average annual interest
rate of 9.4%), 100% of the principal amount of which is guaranteed by Genesis.
As previously disclosed, ElderTrust, Genesis and Multicare have been discussing
a proposed restructuring of the loan and other relationships among the parties.
These discussions continue. However, in light of the Genesis and Multicare
bankruptcy filings, any agreement reached by the parties will be subject to
bankruptcy court approval.
In addition, as a result of the bankruptcy filings, it is not expected that the
Genesis and Multicare subsidiaries that are the borrowers on the loans will be
permitted to make further interest payments to ElderTrust until the borrowers'
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bankruptcy plans are approved. ElderTrust will retain its security position in
the collateral underlying the loans but may be unable to recover the full amount
of its principal. Such recovery is ultimately dependant upon the value of the
underlying collateral and, to the extent the loan exceeds such collateral value,
to the general unsecured creditors' recovery on their prepetition claims.
Further, although the subsidiaries of Genesis that are the lessees initially are
required to continue to make lease payments to ElderTrust, in bankruptcy these
entities can assume or reject the leases to which they are parties. If one or
more of the leases are rejected, ElderTrust would be required to find new
lessees for the affected properties or renegotiate the lease terms with the
existing lessees, which could result in substantially lower rental rates being
paid to ElderTrust under the new or revised leases. If a new lease arrangement
is not immediately obtainable, the Company may be required to operate the
returned property. If this occurs, ElderTrust may have insufficient cash to
operate the property.
D. Lee McCreary, Jr., President and Chief Executive Officer of ElderTrust, said,
"While we were hopeful that Genesis and Multicare could stave off bankruptcy
they were obviously unable to do so. As these entities may not be permitted to
make interest payments to us during the bankruptcy period, these filings may
significantly reduce our cash flow. As a result, we expect that distributions to
our shareholders will be significantly reduced or suspended. We believe the
distributions to our shareholders made by us to date during 2000 would be
adequate to satisfy our REIT distribution requirements for 2000." Mr. McCreary
added, "While we believe that we can continue to make our debt service
requirements after giving effect to this reduction in our cash flow, any further
reduction in our cash flow would adversely affect our ability to do so and could
significantly and adversely affect our ability to continue our operations."
Because of the increased uncertainty surrounding ElderTrust's ability to recover
on the Genesis and Multicare loan guarantees referred to above due to the
bankruptcy filings by these entities, Mr. McCreary also said that ElderTrust has
begun assessing the impact of the Genesis and Multicare bankruptcy filings on
the carrying values of ElderTrust's assets. Depending on various factors, such
as the reduction in loan fair market values resulting from the inability to
recover under the Genesis and Multicare corporate guarantees, such assessment
could result in ElderTrust having to record significant charges in the quarter
ending June 30, 2000 or subsequently to reflect any reduction in the net
realizable value of its assets.
ElderTrust also announced today that it expects to record a significant and
separate impairment charge during the quarter ending June 30, 2000, relating to
its aggregate $12 million investment in ET Capital Corp at March 31, 2000. ET
Capital, an entity owned 95% by ElderTrust, has a $7.8 million loan to The AGE
Institute of Florida. The loan, which has an interest rate of 13%, is secured by
a second lien on 11 nursing facilities located in Florida that are managed by
Genesis. AGE has ceased making interest payments to ET Capital. Genesis is the
guarantor on the $40 million first mortgage loan secured by the 11 nursing
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facilities, and the first lien holder has declared Genesis in default on such
guarantee, and, additionally, is seeking recovery from ET Capital of an interest
payment totaling approximately $250,000 received by ET Capital from AGE in April
2000. The precise amount of the impairment charge has not yet been determined.
Finally, ElderTrust announced that events of default have been declared under
two mortgage loans totaling approximately $20 million as it does not meet
certain financial covenant requirements under guarantee agreements relating to
the underlying mortgages. The anticipated impairment charge on ElderTrust's
investment in ET Capital and any additional charges recorded as to loans and
leases to Genesis and Multicare and related entities, when recorded, is expected
to cause ElderTrust to violate net worth covenants under the two mortgage loans
referred to above and under its Bank Credit Facility with a current balance
outstanding of $39.3 million.
ElderTrust is a real estate investment trust that invests in real estate
properties used in the healthcare services industry, principally along the East
Coast of the United States. Since commencing operations in January 1998, the
Company has acquired direct and indirect interests in 31 buildings and has loans
outstanding of $49 million in construction and term financing on eight
additional healthcare facilities.
Certain matters discussed within this press release may be deemed to be
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Although ElderTrust believes the expectations
reflected in such forward-looking statements are reasonable assumptions, it can
give no assurance that its expectations will be attained. Factors that could
cause actual results to differ materially from ElderTrust's expectations include
the extent to which Genesis and Multicare continue to make lease and loan
payments to the Company, the outcome of the Genesis and Multicare bankruptcy
proceedings, real estate conditions, the Company's ability to refinance its
existing bank credit facility when it matures in June 2001, changes in the
economic conditions and other risks detailed from time to time in the Company's
SEC reports and filings. The Company assumes no obligation to update or
supplement forward-looking statements that become untrue because of subsequent
events.
For more information on ElderTrust at no charge,
please dial 1-800-PRO-INFO and enter ticker symbol ETT,
or visit ElderTrust's website at www.eldertrust.com
