| Clarion Hospital (2001) |
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2,800,000 This transaction for Clarion Hospital, a long-standing client, demonstrates the value of First River Advisory's independence from particular financing products. The small principal amount of the financing did not warrant a sale of tax-exempt bonds in the public market, the approach that would have been recommended by investment banking firms. After a thorough investigation into various financing products offered by a number of vendors, First River Advisory recommended a direct placement of bonds to a bank or institutional investor. First River Advisory assembled a request for proposals, and evaluated each proposal rigorously, for there was no clear-cut winner. The analysis was complicated by the occupancy by non-exempt users of a portion of the building addition. The outcome was Clarion's acceptance of a bank's proposal that featured the purchase of 15-year, fixed-rate, fully-amortizing bonds at 5.32 percent, plus the extension of a 15-year, fixed-rate, fully-amortizing conventional loan at a floating rate equal to 250 basis points over LIBOR. A critical objective of Clarion's governing board and management was to preserve the existing "BBB-" rating on its outstanding Series 1997 Bonds despite the incurrence of additional indebtedness. First River Advisory drafted a presentation to Standard & Poor's that highlighted the revenue-generating characteristics of the project and the techniques used to control risk. The outcome was an affirmation of the rating. Like the Allegan General Hospital and the 2000 Chelsea Community Hospital financings, this transaction represented yet another example of First River Advisory's ability to foster coexistence between institutional bondholders and commercial banks. Similar to those preceding financings, First River Advisory ensured that the security to be granted to the bank and the control of remedies in the event of a default did not conflict with that already granted to the Series 1997 Bondholders. To facilitate administration by Hospital management, First River Advisory also convinced the bank to rely largely on the existing covenants rather than introduce new ones. Reference: Vince Lamorella, Chief Financial Officer
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