RI Financing CharterCARE $400M With Debt Service, S&P Rates Bonds "Negative Outlook"

RI Financing CharterCARE $400M With Debt Service, S&P Rates Bonds "Negative Outlook"

The Rhode Island Health and Educational Building Corporation (RIHEBC) moved forward on Thursday with $165 million in bonds to finance the sale of the bankrupt CharterCARE hospital group.

The claim is that financing is necessary for the sale of the hospitals ot the Atlanta-based non-profit Centurion.

The total cost of the bonds with debt service exceeds $400 million.

GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST

CharterCARE operates Roger Williams and Fatima Hospitals. And according to financial documents, CharterCare has lost more than $130 million over the past five years of available financials — 2019 to 2023.

In 2023, CharterCARE lost $60 million alone.

And, according to financials presented in the next four years CharterCARE is expected to lose another $69 million.

Despite the financial situation, RIHEBC’s board voted 4-1 for the massive bond package.

Specifically, they approved $165,000,000, consisting of approximately $97,500,000 in tax-exempt bonds and approximately $67,500,000 in taxable bonds, and with financing and associated fees, the total amount balloons to more than $400,000,000 with debt payments over 30 years.

SEE DEBT SERVICE SCHEDULE BELOW.

Voting for the bond financing was the chair Channavy Chhay along with board member and former Cumberland Mayor William S. Murray, businessman Constantinos Perdikakis, and Amica employee David Almonte.

Voicing strong opposition to the financing scheme was board member Lisa Andoscia.

The chair and officials from CharterCARE claimed with out the approval of the bonds, the facilities would close and the 2,000 plus employees would face job loss.

Providence and North Providence taxpayers take a big hit. As part of this deal, CharterCARE transforms from a for-profit to a not-for-profit and Providence is expected to lose about $4.5 million and North Providence $3.5 million annually.

The new entity said at the meeting it would begin to look at a payment in lieu of taxes (PILOT) structure in the future, but that would only constitute a fraction of what Providence and North Providence will lose in tax revenue.

After the vote, Centurion Foundation's spokesperson, Otis Brown said, "We are gratified by RIHBEC ‘s decision today and certainly appreciate the time and effort of the board and staff to work with us throughout this process. We now look forward to securing funding to support our acquisition of these two critical hospitals and the preservation of 2,700 jobs and dedicated employees."

 

S&P Issues “Negative Outlook”

S&P rates the bonds BB- and gives a negative outlook.

According to the guidance provided by S&P, “We have incorporated these risks into our rating partly through the negative outlook, reflecting a one-in-three chance of a rating downgrade within our one-year outlook period. The negative outlook reflects our view of the outsized uncertainty about future operating performance, given the complexity involved in converting from a for-profit provider under a bankrupt operator to an independent nonprofit provider. We view the turnaround plan as promising, and we recognize the hospital's long history in the market, but also believe that there will be unforeseen industry challenges that could slow progress.”

“A lower rating could be possible if CharterCARE is unable to largely meet forecast expectations during the outlook period or with any meaningful change to the enterprise profile, including a negative shift in market share because of an inability to grow volumes. Our expectations include break-even-to-slightly positive operating performance by 2027, as well as maintenance of key balance-sheet metrics around leverage and unrestricted reserves that are generally in line with levels posted on the opening balance sheet. We do not view CharterCARE as having any capacity for additional debt,” writes S&P.

A "BB-" bond rating signifies a bond issuer is considered to have speculative credit quality with a slightly increased default risk, meaning the issuer's ability to meet its financial obligations is vulnerable to adverse economic conditions, but with some financial flexibility.