1
October 29, 2010
MassDevelopment
2010 Conference
2
Legacy Project Components
Campus Transformation to include:
• Expanded Imaging and Laboratory services
reconfigured more...
3
Rating Agency Process
•S&P and Moody’s were invited to rate LGH.
•S&P Rating prior to bond issue was BBB+ with Negative
...
4
Plan of Finance
• $110 Million Issue
• Series C = $63,000,000 Fixed rate bonds
• Series D = $47,000,000 VRDB backed by J...
5
Negotiated Covenants
• Maintain 70 days cash on hand.
• Debt to Cap not more than .70.
• Debt service coverage 1.25.
• L...
6
Swap Features
• Bid process with 4 banks responding.
• Libor based swap arrangement.
• 30 year term with options to term...
7
Successful Results
• LGH has distinction of being MHEFA’s last tax–exempt bond
closing.
• Blended cost of capital is und...
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8- The Lowell General Hospital Legacy Project- Susan Green

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An overview of Lowell General Hospital's Legacy Project, the hospital's expansion plan, by Susan Green, Lowell General Hospital. Part of Current Topics in Tax-Exempt Finance, 10/29/2010

Published in: Economy & Finance, Business
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8- The Lowell General Hospital Legacy Project- Susan Green

  1. 1. 1 October 29, 2010 MassDevelopment 2010 Conference
  2. 2. 2 Legacy Project Components Campus Transformation to include: • Expanded Imaging and Laboratory services reconfigured more accessible to new lobby. •New Emergency Department and Trauma Center – 38 stations for 75,000 visits / 12 Bed CDU unit. • 3 New Operating Rooms (total 13 after project) and Day Surgery Center. •New Main Entrance/Hospital Lobby/Patient Service Center; New retail space of gift shop, café and medical retail. •60 New Private rooms for Medical Surgical Patients, 12 Labor and Delivery Rooms and 2 Surgical delivery rooms on same level as Post Delivery rooms. Private room % moves from 17% to almost 80%. Total new square feet = 192,195 of new construction and 7,898 renovated square feet.
  3. 3. 3 Rating Agency Process •S&P and Moody’s were invited to rate LGH. •S&P Rating prior to bond issue was BBB+ with Negative Outlook – Rating process yielded affirmation of BBB+ and outlook moved to Stable. •Moody’s rating prior to bond issue was A3 with a Negative Outlook - Rating process yielded a rating change to Baa1 with the outlook moved to Stable. •Comprehensive presentation to both agencies including presentations by Board members, medical staff and senior managers. Tours of the campus and in-depth review of the project. •Rating results based on strong market share growth, outmigration strategy and competitive position as a low- cost, high quality, value provider.
  4. 4. 4 Plan of Finance • $110 Million Issue • Series C = $63,000,000 Fixed rate bonds • Series D = $47,000,000 VRDB backed by JP Morgan Chase • No debt service reserve requirements in either issue • Mortgage granted on 63 acre campus in Lowell • Refinance Series B $14,000,000 • Refinance Bank loans $12,000,000 • Project Costs = $84,000,000 • Capital contribution of $10,250,000 • $10 Million in Legacy Capital left in VRDBs paid by 2015 • Hedge instrument with Deutsche Bank
  5. 5. 5 Negotiated Covenants • Maintain 70 days cash on hand. • Debt to Cap not more than .70. • Debt service coverage 1.25. • Limitations on additional indebtedness. • Limitations on asset transfers to affiliates.
  6. 6. 6 Swap Features • Bid process with 4 banks responding. • Libor based swap arrangement. • 30 year term with options to terminate at year 5 (conterminous with LOC) and annually thereafter. • Capped termination payment. • No collateral posting by either party. • Parity position for swap counterparty. • Independent auditor review of documents to ensure qualification for hedge accounting treatment.
  7. 7. 7 Successful Results • LGH has distinction of being MHEFA’s last tax–exempt bond closing. • Blended cost of capital is under 5 %. • Senior Manager on transaction was Cain Brothers. • Co-Manager on fixed rate issue was BAML. • PFM served as fixed rate pricing advisor. • Retail priority period on pricing day. • Priority was “Friends and Family of LGH”, Mass retail then National retail. • Sold $600,000 in Friends and Family and $26 million pure retail. • Institutional orders were strong despite no debt service reserve in the deal.
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