04/10/08 — Hospital handles bond rate concern

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Hospital handles bond rate concern

By Phyllis Moore
Published in News on April 10, 2008 1:58 PM

Wayne Memorial Hospital has obtained a short term line of credit from BB&T and is working with a consultant to determine how to refinance its 2006 bond issue for $35 million.

After a sharp drop recently in the auction rate bond market, Wayne Memorial and nine other hospitals were sent scrambling to offset the loss.

At its March meeting, the board of directors discussed several options to provide a reprieve.

The board authorized the executive committee to convene between meetings and the hospital president and vice president of finance to sign a letter of credit. The executive committee met on March 24.

An update was given at Tuesday's board meeting.

"We redeemed the 2006 series on March 26 with a line of crecit from BB&T," said Rebecca Craig, vice president of finance. "We're looking at our alternatives to finance again using tax-exempt debt. Whether we go fixed or various rate will be decided the next couple months as the market settles down."

The short term line of credit is valid for up to a year, she added.

Meanwhile, the hospital's 30-year insurance policy with AMBAC is gone.

"We had an insurance policy to get us a rate. That policy is gone, terminated," she explained.

Harold Brashear, chairman of the board's finance committee, said the approved letter of credit from BB&T will allow the hospital to survey market conditions and determine how to refund or refinance the bonds.

The estimated $875,000 in prepaid premium will be written off in the current fiscal year, as a non-operating loss, he said.

In the coming months, Brashear said, the hospital will be working closely with consultant Kaufman Hall and the BB&T financing team.