New Senior Investment Group will internalize its management following a strategic review launched in February. The company also said it will refinance a loan and reset its quarterly dividend.
The internalization, which is expected to be effective as of Jan. 1, 2019, should save New Senior about $10 million in general and administrative expenses each year and boost simplicity and transparency, among other benefits.
The termination agreement New Senior reached with its external manager, Fortress Investment Group LLC affiliate FIG LLC, is nonbinding, and definitive documentation is still pending. New Senior expects to pay FIG LLC $50 million, comprising $10 million in cash and $40 million in redeemable preferred stock with a 6% yearly rate, as part of the termination of the management agreement. The company also plans to employ several current employees of FIG LLC.
In addition, the company plans to refinance a $720 million loan that matures in May 2019 with a long-term loan, pushing out the weighted average maturity of the company's debt to more than five years from the current roughly three years. It expects to save more than $11 million each year given the anticipated lower interest rate on the new loan. The refinancing is expected to be complete in the fourth quarter.
The company also lowered its dividend to 13 cents per share as of the second quarter. Previously, the company paid a dividend of 26 cents per share on a quarterly basis.
J.P. Morgan Securities LLC served as financial adviser to the company during its strategic review. Skadden Arps Slate Meagher & Flom LLP was its legal adviser.
For the second quarter, the company reported negative funds from operations of $14.6 million, or 18 cents per share, compared to positive FFO of $20.7 million, or 25 cents per share, in the year-ago period.