Healthcare borrowers are facing the end of popular credit market relief that finance officials say has made borrowing cheaper and easier to access, particularly for smaller hospitals.
Market relief deadline looms
Hospitals, systems look to capitalize while they can
The end of December also marks the end of programs created during the housing meltdown and credit crisis to bolster tax-exempt borrowing. The American Hospital Association and state health finance authorities have lobbied Congress to extend the programs and some hospitals and health systems have looked to capitalize while they can.
“Why would we want to eliminate” the option, Richard Werkowski, chief financial officer for Speare Memorial Hospital, a 25-bed hospital in Plymouth, N.H., said in reference to one of the expiring programs that offers temporary bank incentives to make tax-exempt loans.
For healthcare borrowers—particularly small hospitals that financial officials say benefited most from the temporary bank incentives to make tax-exempt loans—the December deadline is fast approaching.
Two other provisions are also set to expire. One allows not-for-profit hospital borrowers to secure the credit backing of highly rated Federal Home Loan Banks. The other provided a federal subsidy for municipal bonds issued as taxable debt, or Build America Bonds, which proved hugely popular and, at the end of October, accounted for about one-fifth of tax-exempt bonds. The taxable bonds, though not available to private not-for-profits, have helped lower interest rates by reducing supply in the tax-exempt market.
Michael Rock, AHA senior associate director, said should the popular provisions lapse as scheduled in January the trade group will lobby the incoming Congress to restore them.
The Wisconsin Health and Educational Facilities Authority, which oversees municipal debt issues, has seen strong demand for bank qualified loans, said Lawrence Nines, executive director.
The Watertown (Wis.) Regional Medical Center expects to close on a $2.5 million bank qualified deal before De. 31. Jim Bird, director of finance for the 51-bed hospital, described the deal as a less-costly and faster route to finance the acquisition of a clinic the hospital has leased.
Bank qualified incentives did little to boost borrowing in New Hampshire, but did make financing easier to come by and cheaper, said Dave Bliss, the executive director of the state's Health and Education Facilities Authority.
Werkowski said the provision created more competition among banks to lend to small borrowers. Speare Memorial used the bank qualified option to borrow $4 million in May for renovation and construction. Hospital officials have contacted state lawmakers to urge Congress to continue the option.
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