Stalled Bailout of Bankrupt CharterCARE Hospitals Gets New Financing Scheme

The embattled and bankrupt CharterCARE — the operators of Roger Williams and Fatima Hospitals — is now scrambling for a new financing deal.

The previous bond package, totaling $165 million and first marketed in early May, was designed to pay for the sale of the hospital from the bankrupt Prospect Medical to Georgia-based Centurion Foundation. This non-profit has never operated a hospital.

Those bonds failed to sell. The failure to sell the bonds was unprecedented. Now, the package has been slashed down to $150 million.

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During a "special meeting" on Thursday of the Board of Directors of the Rhode Island Health and Educational Building Corporation (RIHEBC) — the state financing agency floating the bonds — a new deal was proposed and approved.

There are questions about the meeting. One of the members of the board said during the meeting that she received the board package less than 24 hours before the meeting. 

The financial documents discussed in the open meeting were withheld from the public and the media until after the meeting concluded. The documents were not posted for review before the meeting.

And, there seemed to be confusion when the board voted to approve the resolution approving the new financing scheme.

 

A Sea of Red

CharterCARE's financials over the last five years have been a sea of red. 

The losses have grown every year and over the five years exceed $100 million. 

 

 

Poor Rating by S&P Got Worse

The first bond package is rated BB- with a negative outlook by S&P, one of the leading bond rating agencies.

But since that rating, S&P has raised more concerns as the so-called Big Beautiful Budget bill is expected to have an adverse effect on the hospitals due to expected Medicaid cuts.

 

Acadia’s report states:

"The negative outlook by S&P reflects their 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. S&P views the turnaround plan as promising, and recognizes the long history of the Existing Hospitals in the market, but also believe that there will be unforeseen industry challenges that could slow progress. S&P has incorporated these risks into its rating partly through the negative outlook, reflecting a one-in-three chance of a rating downgrade within a one-year outlook period."

 

Negative Credit Factors

According to the consultant, Acadia, the negative credit factors include:

 

Uncertainty about future operating performance, given a lack of a historically comparable track record and anticipated changes in federal and state reimbursement;

Limited market share and meaningful competition from Brown Health and Care New England, both of which have higher market share;

Capital investment needs, given underinvestment in the facility by the prior owner;

High leverage as measured relative to revenue, although principal payments on the 2025A bonds will be deferred until Fiscal 2031, after the anticipated 2030 bullet maturity on the 2025B Bonds, to preserve cash flow; and

Weak regional demographics and safety net status, resulting in a high reliance on governmental payers.

 

And the cost of borrowing got even more expensive for the failing hospitals.

According to documents, bond buyers will receive an even higher return, putting even more pressure on the finances of the hospitals. “Average coupons are currently estimated by Barclays to be 8.00% on the tax-exempt Bonds and 11.50% on the taxable Bonds, respectively, based on market levels as of 8/13/25.”

Barclays is the bank that has been unable to sell the bonds for the past four months.

 

The deal has been further complicated by Rhode Island Attorney General Peter Neronha's imposition of additional restrictions. 

The new deal restricts the use of the funds. According to Acadia:

On July 31, 2025 RI AG further amended its Decision to grant CharterCARE’s request to reduce the required initial net working capital position for CharterCARE post-transaction from $80 million to $45 million while imposing additional conditions including funding an additional $35 million in capital projects and provide for additional oversight while still requiring CharterCARE to maintain the same overall amount of funds available for capital expenditures and to support operations (approx. $146.8 million), with a larger portion of that total falling under the category of “restricted funds” than previously.

The game plan, with the approval of the RIHEBC board, is to go back out to the bond market and sell the bonds this fall.

429 Too Many Requests

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