Refinancing

Project Background

A stand-alone non-profit hospital had issued $45 million in fixed interest rate tax-exempt bonds in 2007, which could be refinanced at par at the Hospital’s option on May 15, 2017. The bonds issued in 2007 had interest rates of 5.50%, and current market interest rates are much lower for the Hospital. The Hospital retained Warbird Consulting Partners to assess their options for refinancing and to implement the selected solution.

Services & Solutions

Warbird first analyzed all of the Hospital’s existing debt to assess how a refinancing of the 2007 bonds might interact with other debt, bond covenants and credit ratings. Warbird then met with senior management and the Board of the Hospital to review debt refinancing options and alternatives. Once the preferred alternative was identified Warbird ran an RFP process to select a bank to refinance the debt. Warbird then worked with Hospital management to negotiate best terms and conditions for the new debt, review bond documents and manage a successful closing.

Outcome & Results

The Hospital selected a variable interest rate loan to pay off the higher fixed rate debt. This loan will reset monthly, and the initial interest rate was set at 1.553%, reducing interest expense by almost 4.00%. While variable interest rates will fluctuate and may rise in the future, we expect that the Hospital will save approximately $1.50 million in interest expense in the next twelve months under current market conditions.