“This agreement secures substantial liquidity support and provides a longer-term window to advance our continued financial turnaround efforts,” Tower Health said in an emailed statement.
The debt exchange will give the system additional runway by avoiding mandatory tenders next year and in 2027 and 2029. While regular maturity dates still exist, the new agreement has no lump sum payments due in advance, Tower said. As part of the deal, current holders will not be taking a haircut.
The pressures facing hospitals during the pandemic, including sharply higher labor and supply costs, were compounded at Tower by an ill-fated 2017 merger that the West Reading-based system is now unwinding. A plan to sell its shuttered Brandywine Hospital to Penn Medicine earlier this year fell through, and two major rating companies downgraded its debt last year to CCC and CCC+.
But finances are improving, prompting the refinancing backed by “overwhelming” bondholder support, the hospital system said.
Tower Health said it expects to return to profitability in the current fiscal year after meeting or exceeding financial and growth targets. Operating income has improved by more than $100 million this fiscal year compared to the same period last year. The system saw “significant growth in patient volume across most service lines.”
The system had an operating loss of about $193 million in the last fiscal year ended June 30.
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