Hospital Type: Acute Care
Location: Greenville, Ohio
Project Objective: Renovation/ Repositioning
Financing Amount: $46.86 million
Source of Funding: Tax-exempt bonds enhanced by a bank letter of credit. A swap fixes the interest rate on half of the bonds at 4.39 percent for 20 years.
Background and Challenges
Wayne Hospital knew it needed to upgrade and had completed several small projects to improve its revenue stream. Projects such as private rooms were planned for the future with a goal of enhancing patient experience. The hospital hired Lancaster Pollard as a financial adviser to determine the financial viability of its long-term plans, and what started out as a consumer-driven plan was refocused to enhance the hospital’s competitive situation and business outlook, as well.
Financial Solution
Lancaster Pollard transitioned into an underwriter role to help the hospital determine the most cost-effective way to finance its projects. The phased construction plan was reprioritized so that revenue-generating services would be built first, further improving the hospital’s financial strength. As CFO Marvella Fletcher said, “It became not just, ‘wouldn’t it be nice.’ It became also, ‘how can we position ourselves for the future?’”
Lancaster Pollard’s comprehensive credit overview articulated the hospital’s current strengths and its strong potential as a renovated facility. Using a commercial bank letter of credit let the unrated hospital issue debt at an “AA+/A-1” rating. The structure includes participation by local banks to maintain Wayne Hospital’s valued relationships. Lancaster Pollard also arranged for a swap to fix half the debt at a low all-in cost of capital of 4.39% for 20 years, well below rates obtained by investment-grade peers over the same period.
Outcome
Wayne Hospital will rebuild and expand its ER first, followed by a new surgery center and expanded radiology and ambulatory services. Additional phases will be constructed based on stabilization of the hospital’s operating performance following the completion of these initial improvements.
Lancaster Pollard Investment Advisory Group is advising Wayne Hospital on management of its project fund to maximize the investment potential of these monies during the construction period. Wayne hospital will be stronger financially, improve its competitive situation and have more patient appeal because of integrated strategic and financing plans.
|
|
|
