PROVIDENCE – A quasi-public state funding group has revised bond issuances needed to fund the sale of two cash-strapped hospitals.
In April, the Rhode Island Health and Educational Building Corp.'s board approved the issuance of up to $165 million in bonds to help Georgia-based nonprofit The Centurion Foundation acquire the hospitals – Roger Williams Medical Center in Providence and Our Lady of Fatima Hospital in North Providence – from the recently bankrupt Prospect Medical Holdings Inc. Once the sale is final, the hospitals would operate under a newly formed nonprofit entity, CharterCARE Health of Rhode Island.
Now, the bonds’ total par value will fall to up to $150 million, according to the amended issuance RIHEBC approved during a special meeting Thursday. Also, the tax-exempt bonds will rise from about $84 million to $127.8 million and the taxable bonds will fall from about $56 million to $13.5 million, according to a memo obtained by Providence Business News from RIHEBC’s financial adviser, Acacia Financial Group Inc. The tax-exempt bonds include $35 million that is allocated for capital projects.
This financing is meant to address an
updated set of conditions on the deal Attorney General Peter F. Neronha announced on July 31. The conditions include requiring Centurion to secure $35 million within 90 days of the deal closing. This money will now come from the bonds, as opposed to reserve funds. However, if the $35 million isn’t raised in the bond market, CharterCare will have to come up with the funds 90 days after the sale closes.
The interest rates have risen to 8% on tax-exempt bonds and 11.5% on taxable bonds, which is a dramatic increase over the original interest rate of 5.64% on tax-exempt bonds and 8.34% on taxable bonds.
The bonds earned a BB- rating, with a negative outlook, in March from S&P Global Ratings, which was reaffirmed Aug. 11, according to Acacia, which listed the Medicaid cuts that are part of the $4.5 trillion tax breaks and spending package that President Donald Trump dubbed the “one big beautiful bill” and signed into law on July 3 as a government funding risk. The bill is expected to have several “significant impacts” on nonprofit hospitals, including less revenue, longer patient wait times and more uncompensated care.
CharterCARE started actively marketing the original bonds on May 8 and investors’ interests “fell short of expectations,” especially with the taxable bonds, according to Acacia.
But Benjamin Mingle, CEO and president of Centurion, noted that the hospital’s operating stability has improved since April.
“The health of the hospital is moving in the right direction,” Mingle said during the meeting. “The plan of finance is more sellable and less risky.”
Mingle also said Centurion plans to pay past-due taxes and begin negotiating a payment-in-lieu-of-taxes agreement with Providence and North Providence after the sale closes.
The bond pricing is expected to be finalized on Aug. 26, with a closing date set for Sept. 4 and the first principal payment on Nov. 15, according to Acacia.
Katie Castellani is a PBN staff writer. You may contact her at Castellani@PBN.com.
