Indiana Health System Obtains $21.1 Million in Refunding

Connersville, Ind. (Jan. 16, 2013) – Fayette Regional Health System, located in Connersville, Ind., recently obtained $21.1 million in direct funding with the assistance of Lancaster Pollard, a national investment banking and mortgage banking firm headquartered in Columbus, Ohio. The financing was managed by Vice President Chris Blanda.

"When the health system recently restructured its bonds, our goals included reducing our cost of capital and finding a financial source to underwrite us," said Randall White, president and CEO of Fayette Regional Health System. "Now we are saving more than $175,000 in interest a year and are pleased with the terms from the institution that refunded our bonds."

The health system, a 96-bed community hospital, provides health care services to a three-county region in Eastern Indiana. Fayette Regional had existing tax-exempt, variable-rate demand bonds that were enhanced with a direct-pay letter of credit, renewed annually. Although the health system had positive operating margins and near investment-grade liquidity, its LOC provider wasn't interested in community hospital credits any longer and wanted the organization to find an alternative financing structure.

The hospital engaged Lancaster Pollard to restructure its existing indebtedness. After exploring several funding options, the firm recommended that the system refund that issue with a bank private placement, a structure that would be very familiar to the hospital yet remove the risks of LOC-backed bonds. After negotiating with local, regional and national banks, the firm selected a purchaser that provided a seven-year term and an attractive spread on the tax-exempt, variable-rate issue. The bond proceeds will refund $19 million of outstanding debt and $2 million of new money for the construction of a 12-bed geriatric psychology unit for the hospital.

Blanda said, "The restructuring allowed Fayette Regional Health system to remove the risks associated with its previous debt structure, while providing more permanent long-term debt. The new bonds are also prepayable and allow the hospital the flexibility to explore an even more permanent, long-term, fixed-rate bond issue or mortgage in the future."

Lancaster Pollard helps health care, senior living and affordable housing organizations expand and improve their services by providing financing solutions. The firm offers a full range of investment banking, mortgage banking and investment advisory services and has one of the largest groups of financial professionals dedicated to health care in the country.

For more information about the Fayette Regional Health System's and other health care financings, visit www.lancasterpollard.com/hospital-financing.aspx.