Health Care Network Associates, LLC
Experts in Accessing Capital for Health Care Providers
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One of the best ways for determining whether HCNA can be of assistance to your organization is to review how we have assisted other clients. Here are summaries of some of our financial advisory engagements in recent years.

Small Community-based Hospital

Situation: Although it had $4 million in reserves under its existing bond and FHA mortgage documents, the hospital was short on working capital. It also had high interest rate debt.

HCNA Recommendation: We implemented a two step refinancing strategy for the hospital. The first step was a taxable refinancing of the existing tax-exempt bonds. This released the reserves in the bond resolution and reduced the interest rate by 75 basis points. The second step was an unrated tax-exempt refinancing of the taxable loan. This refinancing released the reserves under the FHA mortgage and reduced the interest rate by another 125 basis points.

Suburban Community Hospital

Situation: The hospital had a restricted reserve equal to 60% of its outstanding tax-exempt bonds. The hospital wanted easier access to these reserves. It also needed cash for physician integration activities that might not qualify for tax-exempt bond financing.

HCNA Recommendation: We recommended that the hospital issue taxable variable rate debt, and obtain protection from interest rate increases through a swap or a cap. This released the reserves and enabled the hospital to have maximum flexibility with its funds during the next few years with the option to refinance on a tax-exempt basis at a later date. The hospital issued taxable debt, part fixed rate and part variable rate.

Upstate Community Hospital

Situation: The hospital had received CON approval to convert a nursing unit to skilled nursing beds at a cost of approximately $2.5 million.

HCNA Recommendation: We recommended that instead of borrowing the construction funds, which would prove difficult because of the hospital's outstanding FHA insured mortgage, the hospital use funds in an existing reserve required by FHA. We assisted the hospital in developing its presentation to FHA and in obtaining FHA's approval to release the funds for that purpose.

Major Teaching Institution

Situation: The hospital had bonds secured by a large FHA mortgage. The bonds had already been partially refinanced, but some high interest rate maturities remained. In addition, the financing structure required the bonds to be retired well before the maturity of the mortgage loan.

HCNA Recommendation: We devised a financing strategy to take advantage of low interest rates using credit enhancement provided by a bond insurer. The strategy also captured the present value of the future forgiveness of the mortgage balance without increasing the mortgage amount or the interest rate. The refinancing based on this combined strategy "released" $40 million in cash. We assisted the hospital in obtaining the approval of the refinancing from the Department of Health, the Dormitory Authority, FHA, HHS, and a bond insurer.

Upstate Health Care System

Situation: This system is in the forefront of managing care in its region and needed a flexible set of financing documents to enable it to react quickly to opportunities in its market place.

HCNA Recommendation: We recommended that the system refinance its outstanding tax-exempt debt through the local IDA using a Master Trust Indenture. This provided considerable flexibility for a variety of financing and corporate decisions, while not requiring a gross receipts pledge or a mortgage. The refinancing also resulted in substantial debt service savings.

Inner City Community Health Center

Situation: This inner city community health center had been attempting to secure financing for a new facility for more than 5 years, but had been unable to do so. As demand increased the situation was becoming critical because of a severe space shortage in its existing facility.

HCNA Recommendation: We recommended that the loan be restructured to reduce its size and that a detailed feasibility projection be prepared. HCNA helped to identify a high yield tax-exempt mutual fund that was impressed with the need for the Center and its efficient operations, and was willing to purchase the bonds . The financing was closed two months after the Center accepted the financing proposal.

Outer Borough Teaching Hospital

Situation: This community-based teaching hospital had embarked on a complete restructuring of its information technology operations. However, the leasing company that was to provide the financing for the new equipment backed out of the transaction after the equipment had been ordered.

HCNA Recommendation: We helped locate a non-traditional source of tax-exempt leasing and closed a tax-exempt lease quickly. The implementation of the new information technology system was not disrupted.

Hospital Parking Garage Refinancing

Situation: A financially distressed inner city hospital owned a 900 car parking garage that was financed at a very high interest rate and was draining the hospital of $500,000 annually.

HCNA Recommendation: Although the hospital was experiencing substantial losses from its operations, we were still able to restructure and refinance the tax-exempt debt. As a result, the parking garage is no longer a financial drain on the hospital.

Construction of a New Parking Garage

Situation: To address a severe parking shortage, an inner city hospital planned a new parking garage. Other development plans at the hospital were dependent on relieving the parking congestion.

HCNA Recommendation: We worked with the construction team to expedite the financing of the parking garage. As a result of our ongoing coordination with the construction team, we were able to finance the parking garage four months earlier than originally projected.

Suburban Health Care System

Situation: The system had refinanced a substantial portion of its outstanding bonds using municipal bond insurance, but still had restrictive covenants from the portion of the bonds not refunded. Additional bond insurance was unavailable.

HCNA Recommendation: We recommended that the system refinance its outstanding debt through the local IDA using unrated bonds on a parity with the existing bonds. Not only did the refinancing eliminate the restrictive covenants, but it also produced $7 million in immediate cash flow savings and enabled the system to fund an under-funded bond reserve.

Financing for Construction of a New Skilled Nursing Facility

Situation: A new for-profit 280 bed skilled nursing facility had received Certificate of Need and all local approvals to commence construction. It was unable to use the FHA mortgage insurance program because of substantial offsite costs and had been unsuccessful in obtaining an alternative funding source.

HCNA Recommendation: We structured loans from a commercial bank and a mezzanine lender that enabled the project to obtain construction and permanent financing for 90% of the Certificate of Need approved Project Costs, meet the financing contingency in its CON approval and commence construction.

Debt Restructuring

Situation: A suburban community hospital was in technical default on a bank loan and needed to refinance that loan and obtain additional capital for badly needed renovations. An interested bond investor had been located but negotiations were stalled.

HCNA Recommendation: HCNA devised a strategy of high level meetings, a presentation explaining the cause of and corrective actions taken for the hospital's past financial problems, and its support from the health system of which it was a member. As a result of the meetings and presentations the hospital and the health system made a financing proposal to the investor which was accepted.

Renovation of a Parking Garage

Situation: The parking garage of a major teaching hospital required substantial renovation. The hospital wished to minimize debt service costs associated with the renovation in order to limit the increase in parking fees, especially because many employees used the parking garage daily.

HCNA Recommendation: HCNA devised a plan of finance which enabled the hospital to obtain municipal bond insurance and finance the renovations off-balance sheet. By using bond insurance to keep interest rates low there was a minimal increase in parking fees for employees. In addition the hospital's debt capacity was not impacted.

Refinancing of Skilled Nursing Facility's FHA Insured Mortgage

Situation: A new 360 bed skilled nursing facility funded its construction through bonds secured by an FHA insured mortgage loan. Six years after the construction was completed it had still been unable to complete final endorsement. As a result, the facility had a high interest rate, large cost disallowances and was unable to obtain release of substantial funds.

HCNA Recommendation: HCNA assembled a team of legal and financial experts to complete the final endorsement process. We also recommended that the outstanding bonds be refinanced. Upon completion of both final endorsement and the refinancing, the full mortgage amount was recognized by FHA, the interest rate on the mortgage decreased from 9% to 4.65% and $5.8 million in reserves was released to the facility.

 

 

 
 
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