Bonds to Finance CharterCare Deal Did Not Sell Last Week, Hospital Expert Issues Warning
GoLocalProv News Team
Bonds to Finance CharterCare Deal Did Not Sell Last Week, Hospital Expert Issues Warning
The Wall Street firm Barclays, the deal's underwriter and the group leading the bond marketing, was unable to sell a significant amount of the bonds.
The money from the bonds was to fund the deal in which Georgia-based Centurion Foundation would take over the hospitals from bankrupt Prospect Medical Holdings.
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"So that would be a combination of they didn't have enough orders for bonds, and I guess Barclays certainly has the ability to take these bonds down themselves, they could buy the bonds on the banking side, but they didn't do that either,” added Nemzoff.
In 2020, Nemzoff led a team that attempted to purchase Care New England for $550 million.
CharterCARE - Centurion Deal
The bond package regarding CharterCARE has two segments — the first is $88,125,000 in revenue bonds to be repaid over 30 years and a separate $52,540,000 in taxable bonds to be repaid over ten years.
This month, Barclays sent the offer memorandum to potential investors, held one-on-one calls, and was scheduled to have meetings in New York last week with prospects. Steven Kim, a managing director at Barclays, did not respond to a request for comment.
A representative for RIHEBC declined to comment on the status of the sale of the bonds.
Nemzoff said he thought Barclays would take the deal back to the market as early as Wednesday, but warned that the rating the deal received by S&P clearly has had an impact.
S&P rated the bonds as BB- with a negative outlook.
“And if they can't sell the bonds, then there's no bond deal and they won't be able to sell it as it is….what they will do, and I don't know," said Nemzoff. "So I'm just surmising, but Barclays is a very large and very competent banking firm. This is nothing new for them to be issuing taxings and bonds, but they've got a tough bond issue to sell because you've got to double B minus credit with a negative outlook,” said Nemzoff.
Nemzoff said he believes that the future is murky.
“It's in bankruptcy, it lost a ton of money, you've got a feasibility study that shows a dramatic and very rapid turnaround, which some investors may or may not believe. And it's just a tough sell. And I think that they basically don't have enough buyers for these bonds,” Nemzoff added.
Nemzoff said the deal may have to be reworked.
“And the question is, how do you get [bond buyers] to be more interested? One is to adjust the interest rate and make the interest rate higher. But if someone thinks it's a very risky credit, it doesn't really matter what the interest rate is. They may be trying to change it in other ways, they may be trying to reduce the bond size a little bit, reduce the purchase price,” Nemzoff added.
Nemzoff knows the complexity of these types of deals; he was part of a group that tried to buy a Scranton, Pennsylvania, hospital group late in 2024, but they were not able to sell the bonds. The financing fell through, the deal was never consummated, and the hospital group continues to operate in distress.
If the bonds do not sell and the transfer of CharterCare to Centurion collapses, Nemzoff said there may be only one option.
“I don't think these hospitals will close, but I think the fallback position is quite obvious, which is to get control of these assets and give them or donate them or sell them to Care New England,” said Nenzoff.
CharterCARE employs 2,400 full and part-time employees. Just over 1,100 of those jobs are union.
If the bonds do sell and Centurion takes control, CharterCARE would change from for-profit to not-for-profit, and the respective host cities, Providence (Roger Williams Hospital) and North Providence (Fatima), would lose approximately $6.5 million combined in tax revenues.
The two hospitals, combined, have 552 beds, conducted over 17,000 surgeries in 2024, and saw over 377,000 visits last year.