Jamestown Regional Medical Center: Receives Largest USDA Direct Loan to Date
Wipfli Assists in Jamestown Hospital USDA Loan
Situation
In 2008, Wipfli was engaged by the hospital in assist with the financial planning component of the facility planning process. Early work supported a conversion to CAH status and projected future debt capacity to ensure that investment in design services was warranted. Kelly Arduino, a former investment banker, acted as JRMC’s Financial Advisor. Her role was to educate the Board about capital market changes, options on financing and facilitate the RFP process for the eventual financing. She worked in concert with Wipfli’s financial forecast team, which has completed numerous feasibility studies for HUD financings, USDA, bank loans and bond issues, to ensure that the hospital was balancing equity contributions with a reasonable amount of debt supported by operations.
Strategy
With the melt down of the credit market in Fall 2008, access to capital through traditional financing options used by non-profit hospitals, specifically tax exempt bonds, became unavailable and unaffordable. Many hospital projects were put on hold indefinitely as a result. JRMC was not to be deterred and given the project’s importance to the community was willing to look at other financing options, such as USDA.
JRMC decided to utilize the USDA Community Facilities Program by applying for both a USDA Direct Loan and a USDA Guaranteed Loan. The final financing structure and commitment from USDA included a $31 million Direct Loan fixed at 4.25% for 40 years, the largest to date for a hospital, and a $15 million Guaranteed loan for 30 years at a rate of approximately 6.18%. The result is a blended rate of 4.88%.
Benefits
Through the use of an independent Financial Advisor, JRMC was able to negotiate directly with a Lender of Record for the financing and avoid paying placement fees of up to 2.5% and was able to establish reasonable covenants that do not restrict additional borrowings if reasonable days cash on hand and debt service coverage ratios are maintained.
Wipfli provided an examined financial forecast supporting JRMC’s assumptions regarding its ability to have the future financial performance necessary to take on this level of debt. Wipfli’s familiarity with the USDA guidelines and preferred format for the feasibility study was an asset to the smooth processing of the application and provided justification for the large Direct Loan award.
Relationship Executive
Kelly Arduino, Director of Financial Advisory Services |
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