Capital Formation Assignments

First River Advisory has also completed several capital management, rather than capital formation, assignments.

Interim Chief Financial Officer
Chelsea Community Hospital, Chelsea, MI

In March 1997, in recognition of his long-standing service to and familiarity with Chelsea Community, Shelley Aronson was named the Hospital's Interim Chief Financial Officer following the announcement of the chief financial officer's resignation. Mr. Aronson has become involved in the preparation and review of routine financial reports, the performance of financial analyses of new initiatives, the evaluation and organization of managed care contracts, the negotiation of physician contracts, the preparation of casualty insurance claims, and the improvement of the Hospital's cash management function and formalization of its investment policy. He filled this position until a new chief financial officer joined the organization in September 1997.

Mr. Aronson has continued to assist the new chief financial officer, primarily with capital budgeting, long-range project and strategic planning, managed care contracting and investment management. When the opportunity arose to convert Chelsea Community's outstanding variable-rate bonds to a fixed rate, Mr. Aronson assumed the leadership position with respect to the bond issue, as described above.

Reference: Kathleen Griffiths, Chief Executive Officer
(734) 475-3912
This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Capital Management and Planning
Garden City Hospital, Garden City, MI

First River Advisory was engaged in the spring of 1997 to provide support to the chief financial officer in a number of ways. Three assignments were completed:

A "balloon" payment associated with a medical office building financing was refinanced utilizing taxable variable-rate demand obligations backed by a bank's letter of credit. The letter of credit represented the exercise of a forward lending commitment that First River Advisory had arranged in connection with the 1996 financing. Before proceeding in this manner, Mr. Aronson had investigated organizational alternatives (i.e., sale/leaseback), alternatives to utilizing the bank's forward commitment, and funding alternatives that would take advantage of the bank commitment. The eventual $6,000,000 financing included funds for improvement projects as well as the refinancing.

First River Advisory solicited and evaluated proposals for a debt service deposit agreements, an agreement whereby the provider pays a lump sum to the Hospital in return for the right to invest its monthly loan repayments. Mr. Aronson negotiated a clause that provides for the "roll-over" of the agreement to apply to loan repayments associated with a refunding bond issue. This clause was exercised in connection with the issuance of the Series 1998 Bonds.
First River Advisory analyzed the Hospital's debt service reserve fund investments and suggested strategies to improve the fund's yield. The Hospital directed the Trustee to implement First River Advisory's recommended portfolio.

First River Advisory also investigated the merits of and resolved the logistical and other issues relating to sales of accounts receivable. First River Advisory solicited proposals to purchase accounts receivable, but the Hospital decided against proceeding, largely due to the greater magnitude of capital needs that were arising. That, along with other factors, precipitated the issuance of the Series 1998 Bonds to advance refund the Hospital's Series 1991 Bonds and to finance several new capital improvement projects.

Reference: Chris Palazzolo, former Chief Financial Officer
(313) 745-6097
This e-mail address is being protected from spambots. You need JavaScript enabled to view it This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Letter of Credit Replacement
Lock Haven Hospital, Lock Haven, PA

When engaged in 1992, new management of this organization was faced with severe financial losses, weak market position and a poor reputation in its community, coupled with virtually no access to capital, poor bank relationships and an aging physical plant. While the first three factors have been improved considerably, those related to capital have not yet been addressed. First River Advisory's main function was to assemble credit information for presentation to banks for the purpose of replacing a letter of credit that secures a series of bonds. Other activities have included the provision of guidance to hospital management in negotiating with banks and a broader perspective as to the merits of banks' letter of credit terms, conditions and covenants. The replacement letter of credit took effect in July 1997.

Reference: Darrell Hartline, retired Chief Financial Officer
(570) 769-1950
This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Work-out of Defaulted Loan
Sheehan Memorial Hospital, Buffalo, NY

In March 1996, First River Advisory was retained by Sheehan Memorial Hospital, an inner-city institution located in Buffalo, to assist in the negotiation of a workout agreement with respect to its defaulted indebtedness to the U.S. Department of Housing and Urban Development. First River Advisory successfully structured a mortgage modification agreement which satisfied HUD, the Health Care Financing Administration and the New York State Department of Health. The agreement will allow Sheehan Memorial to make debt service payments within its budget parameters, while enabling it to invest in the program development and capital improvements that will be essential to ensure the institution's long-run viability. As a result of the agreement, the debt will be reclassified from a current obligation to a long-term liability which will allow Sheehan Memorial to obtain more favorable payment terms from its outside vendors and to eliminate its independent auditor's "going concern" qualification.

Reference: Greg Was, former Chief Financial Officer
This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Tender Offer for Certain Outstanding Bonds
Garden City Hospital Obligated Group, Garden City, MI

This transaction involved a tender offer for outstanding tax-exempt bonds, a portion of which had been issued to refinance the acquisition loan for a nursing home. This divestiture was subject to the restrictions imposed by IRS Revenue Procedure 93-17, which addresses the sale of bond-financed assets to nonexempt (other than governments or Â§501(c)(3) organizations) persons, especially within five years of the financing. Shelley Aronson, while employed by Chemical Securities, collaborated with the client's legal counsel to request a private letter ruling from the IRS. To induce a favorable ruling, Mr. Aronson proposed the tender offer as a means to effectuate the prompt redemption of the bonds. The favorable ruling was issued (# 9438008), and has been used as a basis for legal opinions relating to other divestitures, most notably those in connection with the sale of hospitals to partnerships involving Columbia/HCA.

This tender offer differed significantly from many of the others which have been conducted since 1994. First, the tender offer applied to less than Â¼ of the principal amount of outstanding bonds, rather than the entire issue. Further, different percentages applied to each of the two maturities of bonds. Bondholders' decisions to tender had to be evaluated against a substantially less than 100% probability that their bonds would be defeased if an insufficient principal amount of bonds were tendered. The second major difference concerned credit quality. With the bonds rated Ba/BBB- at the time, bondholders' decisions required a careful analysis of the organization's credit quality and future prospects, unlike many of the other tender offers which applied to insured bonds.

First River Advisory completed the financial advisory services which Shelley Aronson had commenced while with Chemical Securities. Its functions included

preparing documents, including comprehensive credit disclosure;
coordinating the functions of the trustee, the dealer-manager, the issuing authority, the NRMSIRs, DTC and the various nominees and other intermediaries for the beneficial owners;
responding to questions from bondholders and their intermediaries;
evaluating purchase price offers; and
arranging for the defeasance of bonds not tendered, and the assignment of new CUSIP numbers to enable the market to distinguish between those bonds which were then pre-refunded and those which remained obligations of the Obligated Group.

All services were provided in a manner to promote the issuance of the Obligated Group's Series 1996 Bonds, on which First River Advisory acted as Financial Advisor.

Reference: Chris Palazzolo, former Chief Financial Officer
(313) 745-6097
This e-mail address is being protected from spambots. You need JavaScript enabled to view it