Property Type:
Community Hospital
Location:
Alamosa, Colo.
Objective:
Expansion/Acquisition
Financing Amount:
$6.5 million
Sources of Funding:
Tax-exempt bonds enhanced by a bank letter of credit
Other factors:
A swap fixes the interest rate on
$2 million of the bonds
Closing Date:
April 26, 2007

Background & Goals
San Luis Valley Regional Medical Center is located 122 miles from the nearest Level II Trauma Center. The 80-bed hospital completed its first bond financing in 2005 to modernize its campus and add services to support the community’s private practice physicians.

The $11.4 million financing in 2005 was structured with a bank letter of credit, which carried an excellent rating of “AA-/A-1+” and offered financial flexibility for transactions that were expected during the next ten years.

During the next two years, the hospital recruited more physicians and the renovated hospital quickly ran out of space.

Sources of Funding & Outcome
The demand for more space occurred at an opportune time in the financial markets. Health care credit spreads remained low. Additionally, Lancaster Pollard had structured the 2005 bond issuance conservatively, leaving San Luis Valley flexibility to borrow additional funds without harming its financial performance.

Lancaster Pollard and the letter of credit bank issued an additional $6.5 million in tax-exempt bonds structured identically to the 2005 issuance. The transaction took only 49 days: Both the underwriter and bank were familiar with the hospital, and completing the 2005 project with Lancaster Pollard helped San Luis Valley understand how to meet its financial targets and prepare for this next debt issuance, Chief Financial Officer David Freshour said.

The funds will go toward operating room expansions and the purchase and renovation of a medical office building. The improvements are expected to provide additional stability for the growing physician staff.