300-Bed Community Hospital

Hospital Advisor on Long-Term Debt Restructuring

A struggling community hospital, unable to access the capital markets due to outdated and cumbersome tax-exempt bond covenants, engaged HMP to assist it in developing and implementing a strategy to secure sufficient capital to invest in new programs and facilities.

Issue

  • Existing bond covenants which tied up significant cash in a debt service reserve fund and severely limited additional borrowing.

    • Approach

    • Evaluated the hospital’s existing financial condition and documented the prospective financial impact of the proposed strategic capital investment.
    • Documented and secured board approval for a proposed new capital structure for the hospital.
    • Solicited proposals to refinance the existing tax-exempt debt and provided the needed additional capital from commercial banks.
    • Advised the hospital on the proposals received and assisted in negotiating the final loan terms.

    Results

    • Hospital timely closed on the required borrowing on favorable terms.
    • The hospital is now the most profitable in its market.