The probability of default across most U.S. business sectors increased in the first quarter, but the healthcare sector — including senior living — is projecting the highest probable default rate, according to a new report from S&P Global Intelligence, McKnight Senior Living reported. Staffing shortages and pandemic fears stressed the healthcare sector, which also was one of the leading industries with bankruptcies so far in 2022, S&P Global Market Intelligence data show. Looking at trends in bankruptcy filings in Florida, Tampa-based attorney Scott Underwood of Underwood Murray said his firm is definitely seeing more distress in senior living and care — including assisted living, memory care and some nursing homes — since the onset of the pandemic. “While healthcare was always a bit of a volatile industry, it seems that particular sector has really taken a hit for a while due to various reasons, including a large census drop,” Underwood told McKnight’s Senior Living. A previous Polsinelli-TrBK Distress Indices report from the Polsinelli law firm noted that senior living-focused organizations, independent and assisted living communities, and skilled nursing facilities made up a significant portion of healthcare bankruptcy filings in the fourth quarter of 2021. BDO noted in its 2022 Healthcare CFO Survey, which included long-term care organizations, that many healthcare organizations will continue struggling to meet their bond covenant obligations given the increased cost of supplies, staffing challenges and the risk of supply chain disruption. The BDO survey of 100 healthcare chief financial officers — including long-term care industry executives — revealed that 42% of organizations defaulted on bond or loan covenants in the past 12 months. And 25% said that although they had not yet defaulted, they were concerned about defaulting in the next year. Read more.
Don’t miss the “Real Estate Implications of COVID-19 on Senior Living Business Models” session at the Annual Spring Meeting! Click here to register.
