American Retirement starts exchange offer for convertibles

New York, Aug. 14 - American Retirement Corp. announced an exchange offer for its 5¾% convertible subordinated debentures due 2002.

The offer is part of a refinancing plan developed by the Nashville, Tenn. provider of senior living housing and care to deal with $371.7 million of debt maturities this year, including the $132.9 million of convertibles and $238.8 million of mortgage debt.

For each $1,000 principal amount of the convertibles, American Retirement is offering:

-$839 principal amount of series A senior subordinated notes due Sept. 30, 2002 paying interest at 5¾%;

- $190 principal amount of series B senior subordinated notes due Sept. 30, 2009 paying interest at 10%. Up to 2% of the interest can be paid in kind. They are callable any time at par; and

- 13 warrants to purchase one share of the company's common stock at an exercise price of $3.50 per share and with an expiration date of Sept. 30, 2009.

The new notes will be senior to the convertibles but subordinated to other debt of the company.

The exchange, which is exempt from registration under the 1933 Securities Act, is limited to $126.0 million of the existing convertibles. While planned transactions with Health Care Property Investors, Inc. are subject to at least 75% of the convertibles being tendered, American Retirement said it will accept any securities tendered.

If $126.0 million of the convertibles are tendered, the company will issue $105.7 million of Series A notes, $23.9 million of Series B notes and warrants to purchase 1.638 million shares.

As part of the refinancing, American Retirement has entered into sale and lease-back transactions on 16 communities and various other refinancing and capital raising transactions since November 2001, generating gross proceeds of $362.0 million.

Of these proceeds $327.2 million was used to repay related debt and transaction-related reserves and escrows. The remaining $34.8 million was used for working capital and transaction costs.

Through the refinancing, American Retirement has extended the maturity of substantially all its debt, other than the convertibles, to January 2004 or later.

On Wednesday American Retirement entered into a loan agreement with HCPI under which HCPI will loan one of the company's subsidiaries $112.75 million. The loan is for five years at 19.5% of which 9% is payable in cash with the proportion increasing by 55 basis points a year from April 2004. The company also entered into a binding securities purchase agreement with HCPI under which HCPI will make a $12.25 million minority investment in certain of the company's subsidiaries.

American Retirement expects $120.0 million of net proceeds from the transactions.

The investment from HCPI will be used first to repay the Series A notes and then any remaining convertibles, together with accrued interest.

The information agent for the exchange is D.F. King & Co. at 212 269-5550 (collect) or 800735-3591.

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