Remember MCI? After emerging from bankruptcy in 2004, the
renamed Worldcom again had shares trading on the Nasdaq.
While many seemed skittish about the company's troubled past,
savvy value investorssaw that its assets were of very
high quality, and those that followed through with their
convictions reaped a nice return when
Verizon (NYSE: VZ) bought it out in 2005.
Much as I'd like to say otherwise, I don't see any
similarly happy ending for
Sunrise Senior Living (NYSE: SRZ), which has
also considered seeking bankruptcy protection to help deal
with its big debt burden.
Hard times
Sunrise provides senior living services including
luxury independent living, assisted living, and skilled
nursing services. It's a small industry that has been hit
hard by the recession. Two larger companies in the niche,
Brookdale Senior Living (NYSE: BKD) and
Emeritus (NYSE: ESC), have hemorrhaged money
in recent years. So has Sunrise.
In the third quarter, Sunrise saw its occupancy rates
plummet, offsetting a rise in average daily revenue per
occupied unit. Comparable-community revenues (think
same-store
salesfor senior living facilities) were down 2.2% year
over year.
Revenue slipped 7% to $383.6 million, and the company lost
$44.4 million, or $0.88 per share. The loss was actually less
severe than last year's, but investors quickly hammered the
stock following the results; shares dropped by nearly a third
Monday.
Great expectations
Despite its financial woes, Sunrise is still trying to
accentuate the positives. In its most recent quarter,
management highlighted the progress with its ongoing balance
sheet restructuring.
Sunrise has about $412 million in defaulted debt, so
restructuring that debt is clearly a top priority. One of
many initiatives includes selling a portfolio of 21
communities to Brookdale, which will hopefully provide some
of the proceeds necessary to extend its loan maturities so it
can live to fight another day. That would not only keep its
residents and shareholders happy, but also
REITslike
Ventas (NYSE: VTR) and
Senior Housing Properties Trust (NYSE: SNH),
both of which obtain substantial revenue from properties that
Sunrise manages.
The battle of its life
Even before the latest drop, Sunrise hadn't seen much
sun lately. Shares traded above $30 in late 2007, but go for
less than $3 today. Continued... |