French Hospital Medical Center in San Luis Obispo, Calif., and its parent company, Vista Hospital Systems, San Luis Obispo, are in default on $181.7 million in bonds, according to a trustee for their creditors.
A March 15 disclosure published by a San Francisco-based division of U.S. Bank, which is trustee for the bonds, said French Hospital and Vista missed a March 1 debt payment of $1.2 million and it considers them in default on the entire amount.
The bonds were issued between 1992 and 1997 by the California cities of Arroyo Grande, Corona and San Luis Obispo, for Vista to purchase local hospitals and for a former subsidiary, Vista Medical Foundation, to buy a physician practice management firm. The bonds are held by the mutual-fund arms of several investment banking firms, said Dan Finnane, chief operating officer of San Francisco-based Primus Management, which manages Vista's three hospitals.
Finnane said late last week that negotiations have been under way with the bondholders for several weeks to restructure the debt, and that the missed payment was no surprise. Partial debt payments may be made shortly, but nothing concrete has been negotiated, he said, noting that operations at French Hospital and other Vista hospitals would not be affected.
Financial problems at not-for-profit Vista became apparent late last year, when Vista Medical Foundation filed for bankruptcy. It was auctioned off in January for $1.5 million.
According to unaudited financial documents attached to the disclosure, French Hospital lost $7.4 million in 1998 on revenues of $42.4 million. That contributed to Vista's 1998 loss of $12.2 million on revenues of $134.8 million. Finnane said virtually all of Vista's debt is in the defaulted bonds.
Vista purchased 124-bed French Hospital in July 1997 from Santa Barbara-based Tenet Healthcare Corp., which inherited the hospital in 1996 as part of its acquisition of OrNda HealthCorp. Finnane said a restructuring of the hospital's operations was under way.
Vista also owns 32-bed Arroyo Grande Community Hospital and 225-bed Corona Regional Medical Center. Vista's parent firm, not-for-profit Permian Healthcare Corp. of Denver, which is not affected by the default, also owns 213-bed Edgewater Medical Center in Chicago.