01—Abstract
Summary
Summary of the 10-K filed April 16, 2001. Cited figures are marked; the original filing is the authoritative source.
Ventas, Inc. (NYSE: VTR) reports a net loss of $65.5 milliona, or $0.96 per share, for 2000, driven largely by a $96.5 million charge for the United States Settlement and a $48.3 million write-off of uncollectible rent from tenants, primarily Vencor.
Vencor, its primary tenant, accounted for approximately 98.6% of 2000 rental revenues, and the Company's rental income was $232.8 millionb. The Company's Vencor-dependent business remains subject to Vencor's chapter 11 case, in which the bankruptcy court confirmed Vencor's Fourth Amended Plan on March 19, 2001. Consummation of that Final Plan is subject to numerous conditions and must occur by May 1, 2001; the Company states that the Final Plan will likely become effective, but it has not been consummated.
If the Final Plan becomes effective, the Company would receive 1,498,500 shares of New Vencor Common Stock (9.99%), retain rent paid through the effective date, and enter Amended Master Leases with base rent of $180.7 millionc annually, and would pay $103.6 million to the United States under the settlement. The Company's senior bank debt under the Amended Credit Agreement totaled $886.4 million at year-end 2000, and the lenders' Vencor effective date deadline has been extended to April 30, 2001, with further extension options.
Stockholders' equity was a deficit of $117.5 milliond at December 31, 2000, and the Company paid dividends of $0.29 per share in January 2001 for 2000, intending to pay at least 90% of 2001 taxable income. The filing also highlights significant risks: the Company's REIT status could be jeopardized if Vencor failure or certain share-ownership issues arise, the Company faces contingent liabilities on third-party leases and guarantees and potential fraudulent conveyance claims relating to the 1998 Spin Off, and several other tenants have defaulted or filed for bankruptcy.
02—Key points
Key Highlights
- Net loss of $65.5 million, or $0.96 per share, in 2000, compared with net income of $42.5 million in 1999, reflecting a $96.5 million United States Settlement charge and a $48.3 million loss on uncollectible tenant rent.
- Rental income of $232.8 million in 2000, of which Vencor accounted for approximately 98.6% of rental revenues.
- Vencor's Fourth Amended Plan was confirmed by the Bankruptcy Court (order entered March 19, 2001); the Final Plan must become effective by May 1, 2001, and its consummation is subject to numerous conditions.
- Under the Final Plan, the Company would receive 1,498,500 shares of New Vencor Common Stock (9.99%) and enter Amended Master Leases with annual base rent of $180.7 million.
- The Company would pay $103.6 million to the United States under the settlement, of which $34.0 million is due on the Vencor effective date.
- Total debt (notes payable and other debt) was $886.4 million at December 31, 2000, and the Vencor effective date deadline under the Amended Credit Agreement was extended to April 30, 2001.
- Stockholders' equity was a deficit of $(117.5) million at December 31, 2000, and total assets were $981.1 million.
03—Questions
Frequently Asked Questions
What happens to the Company if Vencor's plan of reorganization does not take effect by May 1, 2001?
The filing states that the Final Plan provides for an effective date no later than May 1, 2001, but does not address the consequences if that date is missed. The Company states that failure to consummate the Final Plan could have a Material Adverse Effect on the Company. Under the Amended Credit Agreement, if the Vencor effective date does not occur by the extended deadline, an Event of Default would be deemed to have occurred, and the Company could be required to repay all indebtedness on demand of the Required Lenders, subject to any defenses; a waiver or amendment requires lenders holding more than 50% of total credit exposure.
Why did net income swing to a loss in 2000?
The loss primarily reflects a $96.5 million charge related to the United States Settlement recorded in the fourth quarter of 2000, and a $48.3 million loss on uncollectible amounts due from tenants, which mainly reflects the difference between minimum base rent under the Master Leases and the amount paid under the Stipulation. Interest expense also increased to $95.3 million from $88.8 million.
How much does the Company depend on Vencor for its revenue?
Vencor accounted for approximately 98.6% of the Company's 2000 rental revenues ($229.6 million of $232.8 million). The Company leases all of its hospitals and 210 of its nursing facilities to Vencor under the Master Leases, so Vencor's ability to pay rent determines the Company's rental revenues and its ability to service debt and make distributions.
What dividends has the Company paid and what is its distribution policy?
The Company paid $0.91 per share in dividends declared in 2000, including a $0.62 per share dividend in September 2000 and a $0.29 per share dividend paid January 15, 2001, which the Company believes represents 95% of its estimated 2000 taxable income. The Company intends to distribute approximately 90% of its 2001 taxable income, subject to restrictions under the Amended Credit Agreement.
What are the main risks to the Company's REIT status?
The filing identifies several risks, including that Vencor could become a Related Party Tenant if the Company's ownership of New Vencor Common Stock exceeds the 10% securities test, that the value of the New Vencor Common Stock could exceed the 5% asset test, and that Tenet's potential purchases of Vencor stock could be attributed to the Company. The Company states that if it lost REIT status, it would have a Material Adverse Effect on the Company, and it has adopted charter provisions intended to reduce these risks.
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