Kindred Healthcare, Inc. (“Kindred” or the “Company”) (NYSE:KND)
today announced that it has entered into agreements with Ventas,
Inc. (“Ventas”) (NYSE:VTR) to facilitate the Company’s previously
announced plan to exit the skilled nursing facility business.
Kindred has initiated a process to sell all of its owned and
leased nursing centers, which includes all 36 skilled nursing
facilities (the “Ventas Properties”) currently leased from Ventas.
The agreements with Ventas provide Kindred with the option to
acquire the real estate for all of the Ventas Properties for an
aggregate consideration of $700 million. The agreements with
Ventas also provide that, through October 31, 2018, Kindred has the
right to find one or more purchasers of the Ventas Properties. As
Kindred locates new owners/operators for the Ventas Properties, in
exchange for a payment by Kindred to Ventas of the allocable
portion of the $700 million purchase price, Ventas has agreed
to convey the applicable Ventas Property to the new owner/operator.
At its option, Kindred may also elect to renew the leases for any
of the Ventas Properties through April 30, 2025, and transfer them
into the single remaining master lease agreement (“Master Lease No.
5”).
Benjamin A. Breier, President and Chief Executive Officer of
Kindred, commented, “We are pleased with these mutually beneficial
agreements with Ventas that allow us to fully exit the skilled
nursing facility business in an expedited manner. We expect our
exit from the skilled nursing facility business to be accretive to
earnings and to substantially improve our cash flow generation and
leverage profile going forward. As announced previously, we expect
our associated cost realignment initiative to eliminate
approximately $70 million to $100 million of costs, which includes
approximately $60 million of direct costs associated with our
nursing center division with the balance primarily derived from
reductions of indirect costs in our shared service support centers.
The agreements with Ventas represent an important step forward in
the success of this initiative.”
Mr. Breier added, “With the option to cause the sale of the
Ventas Properties, we have the flexibility to pay Ventas as we sell
these properties, in conjunction with the sale of our other nursing
center assets. While the timing of our exit from the skilled
nursing facility business depends on a number of factors, we are
targeting completion of the exit prior to the end of 2017. As we
have in the past, we will continue to work constructively with
Ventas as we find qualified operators for our nursing centers and
effectuate an orderly transition for our patients, residents and
employees.”
Stephen D. Farber, Executive Vice President and Chief Financial
Officer of Kindred, remarked, “Kindred’s nursing center portfolio
primarily consists of the 36 Ventas Properties (4,363 licensed
beds), 26 owned nursing centers (3,503 licensed beds), 25 nursing
centers (3,217 licensed beds) leased from other third parties and
four managed nursing centers (485 licensed beds), along with seven
assisted living facilities (380 licensed beds), of which two are
owned and five are leased. We expect the after-tax net proceeds
from the sale of these assets will range from $100 million to $300
million after transaction costs, severance expenses, and the amount
payable to Ventas for the sale of the Ventas Properties. We expect
to apply these anticipated net proceeds to reduce funded debt,
which combined with the impact of our cost realignment initiative,
the elimination of approximately $90 million of annual rents, and
the reduction of approximately $30 million of annual capital
expenditures will reduce our leverage.”
The Company will continue to operate the Ventas Properties as it
works to sell them to new owners/operators, and they will remain
leased under their current master lease agreements until Kindred
exercises its purchase option or April 30, 2018, whichever comes
first. If Kindred does not complete the acquisition of the Ventas
Properties by April 30, 2018, the lease for any remaining Ventas
Properties will be automatically renewed through April 30, 2025,
and transferred into Master Lease No. 5.
Master Lease Amendments
In addition to the Ventas Properties, the Company also leases 31
long-term acute care (“LTAC”) hospitals from Ventas. In connection
with the agreements described above, Kindred has renewed the leases
for eight LTAC hospitals it leases from Ventas (the “Hospitals”)
through April 30, 2025, and transferred these Hospitals into Master
Lease No. 5, which is being amended and restated. The base rent and
rent escalators will remain the same for the Hospitals, as well as
for the other 23 LTAC hospitals currently in Master Lease No. 5.
The Hospitals will be combined into a single renewal bundle with
Kindred’s other LTAC hospitals expiring on April 30, 2025.
No rent from the Ventas Properties will be allocated to the
Company’s LTAC hospitals.
The amended and restated Master Lease No. 5 contains terms
substantially similar to the existing Master Lease No. 5, except
for modifications to certain restrictions applicable to Kindred
that will take effect if Kindred acquires all of the Ventas
Properties and pays Ventas the aggregate consideration. As noted
above, since all of the Ventas Properties will either be sold or
transferred into Master Lease No. 5, the Company’s other master
lease agreements with Ventas will be effectively terminated and
only Master Lease No. 5 will remain.
Mr. Breier concluded, “Our extension of the lease term for the
Hospitals reflects our confidence in our LTAC business and our
mitigation strategy for LTAC patient criteria. Moreover, our
agreement with Ventas does not increase the aggregate rent for our
hospitals and provides us with substantial certainty on our rent
exposure to Ventas for several years. Finally, the amendments to
Master Lease No. 5 will provide us with additional transactional
flexibility following the sale of the Ventas Properties.”
Additional details of the agreement with Ventas and the
amendments to Master Lease No. 5 will be available in a Form 8-K to
be filed today with the Securities and Exchange Commission (the
“SEC”).
Forward-Looking Statements
This press release includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended. These forward-looking statements include, but are
not limited to, all statements regarding the Company’s ability to
exit the skilled nursing facility business and the expected timing
of such exit, as well as the Company’s ability to realize the
anticipated benefits, sale proceeds, cost savings and strategic
gains from this initiative, all statements regarding the Company’s
expected future financial position, results of operations, cash
flows, dividends, financing plans, business strategy, budgets,
capital expenditures, competitive positions, growth opportunities,
plans and objectives of management, government investigations,
regulatory matters, and statements containing words such as
“anticipate,” “approximate,” “believe,” “plan,” “estimate,”
“expect,” “project,” “could,” “would,” “should,” “will,” “intend,”
“may,” “potential,” “upside,” and other similar expressions.
Statements in this press release concerning the Company’s business
outlook or future economic performance, anticipated profitability,
revenues, expenses, dividends or other financial items, product or
services line growth, and expected outcome of government
investigations and other regulatory matters, together with other
statements that are not historical facts, are forward-looking
statements that are estimates reflecting the best judgment of the
Company based upon currently available information.
Such forward-looking statements are inherently uncertain, and
stockholders and other potential investors must recognize that
actual results may differ materially from the Company’s
expectations as a result of a variety of factors. Such
forward-looking statements are based upon management’s current
expectations and include known and unknown risks, uncertainties and
other factors, many of which the Company is unable to predict or
control, that may cause the Company’s actual results, performance
or plans to differ materially from any future results, performance
or plans expressed or implied by such forward-looking statements.
These statements involve risks, uncertainties and other factors
detailed from time to time in the Company’s Annual Report on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K filed with the SEC.
Many of these factors are beyond the Company’s control. The
Company cautions investors that any forward-looking statements made
by the Company are not guarantees of future performance. The
Company disclaims any obligation to update any such factors or to
announce publicly the results of any revisions to any of the
forward-looking statements to reflect future events or
developments.
About Kindred Healthcare
Kindred Healthcare, Inc., a top-90 private employer in the
United States, is a FORTUNE 500 healthcare services company based
in Louisville, Kentucky with annual revenues of approximately $7.2
billion(1). As of October 1, 2016, Kindred through its subsidiaries
had approximately 102,200 employees providing healthcare services
in 2,702 locations in 46 states, including 82 LTAC hospitals, 19
inpatient rehabilitation hospitals, 91 nursing centers, 19
sub-acute units, 647 Kindred at Home home health, hospice and
non-medical home care sites of service, 104 inpatient
rehabilitation units (hospital-based) and contract rehabilitation
service businesses which served 1,740 non-affiliated sites of
service. Ranked as one of Fortune magazine’s Most Admired
Healthcare Companies for seven years, Kindred’s mission is to
promote healing, provide hope, preserve dignity and produce value
for each patient, resident, family member, customer, employee and
shareholder we serve. For more information, go to
www.kindredhealthcare.com. You can also follow us on Twitter and
Facebook.
(1) Revenues based upon Kindred consolidated revenues for the
twelve months ended September 30, 2016.
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version on businesswire.com: http://www.businesswire.com/news/home/20161114005466/en/
Kindred Healthcare, Inc.Investor Relations:Todd Flowers,
502-596-6569
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