Bond refinance to save hospital $4 million-plus

By Bob Buckel | Published Saturday, May 31, 2014
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Wise Regional Health System is about to save more than $4 million in interest.

The hospital system’s management team visited Boston May 20, presenting its case for a $98.2 million deal to refinance just over $87 million in 2004 bonds and issue another $10 million for future capital projects.

Bond adviser Chris Janning, senior vice president at First Southwest, was at Tuesday’s Decatur Hospital Authority board meeting to report on how that visit went, and what Wise Regional can expect when the bonds are sold next Wednesday, June 4.

“Your management team did a great job,” he said. “The underwriters are getting fabulous feedback. There’s a lot of interest and a lot of demand.”

He said 14 bond firms attended the presentation in Boston and eight more were on a live teleconference. One firm, in fact, was planning on visiting Decatur to look at the hospital and community prior to the bond sale.

The bonds were recently rated BB+ by Wall Street bond firms Standard & Poors and Fitch.

“We see all that as very encouraging,” Janning said.

The next step is to see how the bond markets close on Tuesday evening, June 3. After a conference call with Janning, two underwriters and Wise Regional’s management, everyone will have an idea of what rate the hospital can expect to get.

The following morning, the bonds will be sold – probably by around 11 Decatur time. That evening, Janning will come back to the board in a 6 p.m. meeting to present the results of the sale for the board’s approval or disapproval.

In the current market, the interest rate should be around 6 percent, well below the original 7.15 percent rate when the bonds were sold in 2004.

“Right now we see the savings, the current cash benefit of refinancing, at just over $4 million,” Janning said Tuesday.

But, he noted, “every 1-100th of a percent is about $100,000 of savings” – meaning even a slight movement could alter that.

“Bond markets have improved since we put this together,” he said. “The best-case, they gave me a set of numbers including savings up to about $5.3 million.”

The hospital board approved publication of a bond resolution and distribution of a preliminary official statement on the bond sale. They will meet again 6 p.m. Wednesday, June 4, to consider final approval of the bond refinancing.


The board also approved the purchase of seven more Arthrex orthopedic sets for Parkway Surgical and Cardiovascular Hospital, which just opened May 5.

That $140,740 expenditure, which was unbudgeted, is prompted by higher-than-expected volume at the facility, which is located on Interstate 35 at North Tarrant Parkway in Fort Worth.

The initial projection called for around 15 such surgeries per month at Parkway. After only a few weeks, the facility now expects to serve 50 to 60 orthopedic patients per month.

CFO Jim Eaton said the Parkway hospital was projected to net about $150,000 above expenses for this year but should show a profit of around $2 million next year and be up to around a $5 to $7 million profit by its fifth year.

“The May financials should look a lot better,” he said.

The board also:

  • approved six new appointments to the medical staff – including three hospitalists – and accepted six reappointments and eight first-year reviews.
  • heard from Eaton that the hospital system overall had an increase in net assets of $616,000 for the month of April on gross patient charges and other revenues of $46.6 million – a strong month for both inpatient and outpatient services.
  • heard that surgery volumes at the Bridgeport campus had picked up in April, but the campus still showed a loss of $236,000.
  • voted to continue negotiations with Skilled Healthcare, a national nursing home and rehabilitation organization, for control of their two Fort Worth service locations.

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