SRZ: Shareholders as of Sept 25,2009

Please find below the list of majority shareholders holding more than 5% in SRZ.
5 groups (including 11.5% by promoters Mr & Mrs Klaassen) hold more than 45% of shares.

And these holders exist from Dec 2008 so they are long term holders.

Largest holder is an Insurance company: Guardian Life insurance Company:
Here is the list




The SEC filing link is here

SRZ: Sells 21 Communities for 204 million.

SRZ has on Oct 9,2009 sold 21 communities with 1389 units for 204 million plus customary transaction expenses. The break up of the 1389 units are :
- 92 independent units
- 876 Assisted units
- 421 Alzheimer's units

The 21 communities sold are located in the following 11 states in US:
California - 1, Colorado - 1, Connecticut - 2, Georgia - 1, Indiana - 4, Michigan - 1, New Mexico - 1, North Carolina - 1, Ohio - 6, Pennsylvania - 2, Virginia - 1
===========================================
BKD is the buyer and some of the salient points are:
- BKD will finance this transaction with 134 million of mortgage debt (substantially through the assumption of existing debt)
- Balance payment (70 million) to be paid from cash on hand.
===========================================
As per SRZ the following are the salient points:
- SRZ will record an impairement charge of 7 million in the Q3 2009 to write down 5 of the 21 communities to fair value.
- SRZ will expect to record a gain in realestate of approximately 50 million.
- SRZ will receive 60 million in proceeds after payment or assumption by the purchaser of certain mortgage loans.
- SRZ will use the funds to pay down the bank line of credit and for working capital requirements.===========================================
Observations:
- SRZ has sold 5 communities below their value book value and taken an impairement charge of 7 million. I am sure these 5 communities are in Ohio and Indiana.
- Since these communities are whollly owned subsidiaries we can expect a reduction of SRZ debt by 130 million.
- Out of 70 million cash payment by BKD (my assumption is) 50 million will be used to pay down the bank line of credit and 10 million will go towards working capital and 10 million to paydown debt related to sold properties.
- SRZ had 614.5 million of debt and 69.2 million of bank credit facility on June 30,2009. (683.7 million)- This transaction should reduce the total (683.7 million) debt to approximately 503.7 million. 26% reduction in debt.
==========================================
Observations with regards to SRZ's Debt Levels:
- SRZ has stated that the German community debt in its books is worth 190.2 million.
- German community debt is partially recourse to SRZ and it is expected that on settlement of debt SRZ will record a gain.
- Once the German community sale is legally closed we can expect a reduction in debt of 190.2 million ie total debt will be reduced to 313.5 million.
[683.7 million -130 million(21 community sale) - 50 million (credit line payback) - 190.2 million (german community sale)]
- It has also been stated in the Q2 report that 170.2 million of debt is in default (has become short term) due to Sunrise failure to meet certain financial covenants.
- I assume with the reduction of debt to approximately 313.5 million from 683.7 million (54% reduction) SRZ will be able to pass the financial covenants test. This will make 170.2 million of short term debt into long term debt and also reduce SRZ's short term cash requirements.
========================================Conclusion: All the communities sold were wholly owned subsidiaries (which means they were really the best assets) Some of these assets (5 out of 21) are located in non performing areas and SRZ has found it prudent to sell them at a loss. These assets are like family jewels and will impact SRZ networth on the long term.

SRZ's problems are however due to short term cash flow issues. This transaction along with German community sale will help reduce SRZ's debt levels by 50% and hopefully bring the company back to stable financial condition.
SRZ then can continue to leverage its brand equity and work on strengthening its financial base improve its market capitalization. We can expect SRZ's market cap (Curent 262.25 million) to double from these levels. Equity dilution is possible when market cap reaches close to 1 Billion dollars (Stock Price 20)

Since we are at an inflection point and news updates will be positively biased we can expect rapid improvement in SRZ's market capitalization. Q3 report would still be negative but we will see substancial improvement in Cash flows

PN: These are my personal views and assumptions about information available in the public domain.
- Link to SEC filing for Q2 2009 report
- Link to SEC filing for sale of 21 communities