A community health center in Boston's Roxbury neighborhood has received the proceeds of a $4.4 million bond sale made possible by a group of teaching hospitals pledged to shore up primary care in needy areas.
The loan is the first put together by the Community Health Center Capital Fund, formed in late 1993 by the Massachusetts League of Community Health Centers and by Neighborhood Health Plan, a 40,000-enrollee HMO with a high percentage of Medicaid participants.
The Conference of Boston Teaching Hospitals helped engineer $13.7 million in pledges from providers and insurers to get the fund started, and the hospital group formally joined the fund's board earlier this year, said Allison Coleman, the capital fund's managing director.
The fund's aim is to foster renovation of aging and inefficient facilities in a network of 45 not-for-profit health centers, 25 of them in Boston, that are independently run or affiliated with a hospital.
The centers operate on slim margins and don't generate the income or creditworthiness to finance upgrades on their own through borrowing, Coleman said.
Seven hospitals helped reduce the cost of borrowing and attract investors by guaranteeing an equal share of the bond amount, Coleman said. Those guarantees plus a letter of credit from the First National Bank of Boston enabled the bonds to carry the bank's A rating instead of the non-investment-grade rating of a small, strapped health center, she said.
The variable-rate bonds carry an initial interest rate of 4.15%, compared with 9% to 9.25% for a high-yield, higher-risk "junk bond." After adding charges for the letter of credit and other costs of capital, Roxbury's Dimock Community Health Center will pay about 5.75% initially on the bonds, Coleman said.
Dimock was the first chosen for aid because it had a fund-raising campaign under way to supply an equity contribution of $4 million, and because plans were "ready to go" for renovation and expansion of its main facility, Coleman said.