With Bonds Not Selling, Neronha Changes Course and Releases Tens of Millions for CharterCare Deal

With Bonds Not Selling, Neronha Changes Course and Releases Tens of Millions for CharterCare Deal

For nearly three months, Barclays has been marketing more than $140 million in bonds to finance the sale of CharterCARE hospitals, Rogerr Williams, and Fatima. The hospitals are presently owned by Prospect Medical, which is in bankruptcy and is poised to be sold to Centurion Foundation of Georgia. Centurion has never owned or operated a hospital.

As GoLocal has repeatedly reported, the bonds, first marketed in May, are not selling. S&P rated the bonds as BB- with a negative outlook. The hospitals have been bleeding money.

RI Attorney General Peter Neronha announced on Friday that he was changing course and freeing up tens of millions that had been held in reserve for the hospitals. Neronha has been under pressure to release the monies for weeks.

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“Taking into consideration that the Centurion Foundation has faced challenges in securing the bond financing necessary to close on the sale, my Office has amended the cash-on-hand requirement at closing from $80 million to $45 million. Recognizing this reduces the CharterCARE system’s cash position at closing, we are also imposing a series of new conditions that will further safeguard our hospitals, including requiring Centurion to obtain the $35 million cash shortfall within 90 days of the transaction closing, invest $50 million in capital expenditures, and importantly, granting my Office the ability to petition to tip the hospitals into receivership should we need to do so,” said Neronha.

 

Bond Sales Stagnated

For the past two months, the Rhode Island Health and Education Building Corporation (RIHEBC) has been attempting to sell bonds totaling $140,665,000. The money from the bonds is to fund the deal in which Georgia-based Centurion Foundation would take over the CharterCARE hospitals from bankrupt Prospect Medical Holdings. The hospitals include Roger Williams and Fatima.

Centurion has never run a hospital.

Josh Nemzoff, a top national hospital executive, told GoLocal in May that this latest development is a potential blow to the sale of the CharterCARE bonds.

“[The provider network is one of] the only profitable assets that Prospect owns, and they just sold them, which means that all those profits go to the new owner,” said Nemzoff.

The sale of the bonds was scheduled to close on May 29; the bonds did not close, and the deal has been floundering. It is now six weeks later.

The Wall Street firm Barclays, the deal's underwriter and the group leading the marketing of the bonds, has been unable to sell a significant amount of the bonds. 

“That means everything that’s left is losing even more money than before, because it’s not offset by these profitable entities. My guess is this will put even more pressure on Prospect and force them to close CharterCARE's sale as quickly as they can. If the Barclays [sale of the bonds] doesn’t go through quickly, there is significant trouble. Now that Barclays has had more than two months to market these bonds, at some point, someone’s gonna say, “This is not working,” Nemzoff added.