American Retirement amends exchange offer

New York, Sept. 12 - American Retirement Corp. said it amended its exchange offer for its 5¾% convertible subordinated debentures due 2002.

The Nashville, Tenn. provider of senior living housing and care said that following discussions with holders of the existing securities it will now make the longer maturity notes it is issuing in the exchange convertible. It also pushed up the maturity date on the securities.

One big holder, Absolute Recovery Hedge Fund LP, said it would participate in the revised exchange. The fund holds $15.34 million, 11.5% of the issue.

"After lengthy negotiations we have concluded that this is the best transaction available to the bondholders and we believe that it appropriately balances the interests of bondholders and other constituencies of ACR," said Wilbur Ross, chairman of Absolute Recover.

Under the revised terms of the offer, for each $1,000 principal amount of the existing convertibles holders will receive $1,029 principal amount of new notes made up of:

- not less than $839 and not more than $902 principal amount of new 5¾% series A senior subordinated notes due Sept. 30, 2002 and

- not more than $190 and not less than $127 principal amount of new 10% series B convertible senior subordinated notes due April 1, 2008. Up to 2% of the interest can be paid in kind. The notes will convert at any time at $2.25 per share. They are callable at 105% of par, declining to par.

The relative amount of the two series of notes to be issued in the exchange will depend on the number of existing convertibles tendered. American Retirement is limiting the amount of series B notes to be issued to $16.0 million.

American Retirement is accepting up to $126 million or 95% of the existing securities. At that level, it will issue $902 of series A notes and $127 of series B notes per $1,000 of old convertibles.

At $119.637 million or 90% of the existing securities it will issue $895 of series A notes and $134 of series B notes.

At $112.9905 million or 85% of the existing securities it will issue $887 of series A notes and $141 of series B notes.

At $106.344 million or 80% of the existing securities it will issue $879 of series A notes and $150 of series B notes.

At $99.6975 million or 75% of the existing securities it will issue $869 of series A notes and $160 of series B notes.

At $93.051 million or 70% of the existing securities it will issue $857 of series A notes and $172 of series B notes.

At $86.4045 million or 65% of the existing securities it will issue $844 of series A notes and $185 of series B notes.

At $79.758 million or 60% of the existing securities or less it will issue $839 of series A notes and $190 of series B notes. There is no minimum threshold for the tender to go ahead.

The new convertibles will be senior to the old ones but subordinate to the rest of the company's debt.

As of Sept. 11, American Retirement said $20.4 million principal amount of the old convertibles or 15.3% had been tendered.

As part of the revision to the transaction, the expiration date was extended to 5.00 p.m. ET on Sept. 25.

Previously American Retirement had been offering for each $1,000 principal amount of the existing notes:

-$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 exchange offer is being carried out to provide the liquidity for planned transactions with Health Care Property Investors, Inc. These are subject to at least 75% of the convertibles being tendered although American Retirement said it will accept any securities tendered.

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.

Las month 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 800 735-3591.

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