Summary of Work:

Methodist Hospital of Southern California is an acute care hospital with 348 licensed beds located in Arcadia, California. The Hospital’s total operating revenues for fiscal year ended December 31, 2017, were $297.5 million. Warbird Municipal Advisors served as the Hospital’s Financial Advisor on a $251.8 million tax-exempt bond issue to refinance existing FHA-insured debt. This bond issue closed successfully on December 11, 2018.

Background:

Methodist Hospital’s previous debt was a loan which was secured by FHA mortgage insurance. The Hospital operates in a challenging service area, with larger competitors on the edges of its service area as well as several smaller for-profit competitors within its PSA. The Hospital’s prior debt could be refinanced for meaningful savings. Furthermore, replacing the FHA mortgage loan freed up reserve funds that improved the Hospital’s cash position.

Areas of Focus:

Warbird provided advice to the Hospital on its debt capacity and credit profile and helped to develop a refinancing structure to best meet the needs of the Hospital. Warbird also assisted the Hospital in preparing a compelling presentation for the rating agencies and prepared financial projections to support the Hospital’s growth story. As a result of these efforts, the Hospital’s 2018 Bonds obtained a rating of BBB+ from both Fitch and S&P.

Conclusion:

The refinancing and restructuring of the prior debt allowed Methodist Hospital of Southern California to lower its overall interest cost and lower its maximum annual debt service requirements by more than $6.5 million. The Series 2018 Bonds were structured as 30-year level debt service amortization and priced at an all-in cost of funds of 4.41%.

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