MedCath Corp., Charlotte, N.C., said that it has completed a recapitalization of its 80-bed Harlingen (Texas) Medical Center with not-for-profit Valley Baptist Health System and some local physician investors to improve the facilitys capital structure.
As part of the transaction, MedCath and Harlingen-based Valley Baptist have elected to convert a portion of their existing debt with Harlingen Medical Center to ownership in the hospital, giving MedCath the majority ownership at 36%, Valley Baptist a 32.1% stake, and physician investors the remaining 31.9%.
In addition, MedCath and Valley Baptist formed HMS Realty with MedCath holding 36.1% and Valley Baptist owning 18.6%. The remaining portion will be owned by a group of physicians and other investors who are not connected to MedCath or Valley Baptist.
HMS acquired the property of the Harlingen Medical Center and entered into a long-term lease with the facility.
In a news release, O. Edwin French, MedCaths president and chief executive officer, said the company has planned to include Valley Baptist as an owner since MedCath restructured Harlingen Medical Center in 2005, three years after it opened. Through this recapitalization we have solidified the hospitals ownership and have greatly improved its capital structure and flexibility, French said in the news release.
MedCath expects the recapitalization to add 2 cents to its annual earnings per share, and will report the contribution from Harlingen Medical Center and HMS Realty as equity in net earnings of unconsolidated affiliates beginning in the quarter ending Sept. 30, 2007. -- by Jessica Zigmond