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Catholic Health System saves $26 million by restructuring debt

Catholic Health System has refinanced more than $68 million in long-term debt, saving $26 million in interest and cash flow by issuing new bonds with the help of seven area banks.

The Buffalo-based hospital system formed The Acute Care Obligated Group, consisting of all four of its primary hospitals, to consolidate a host of prior debt obligations with varying terms and interest. The new group sold $68.82 million in tax-exempt Dormitory Authority of the State of New York Catholic Health System Obligated Group revenue bonds.

Some of the proceeds have already been used to pay off the hospitals' existing government debt from the U.S. Department of Housing and Urban Development, resulting in a fully private financing structure for the system.

"These savings can now be reinvested into our facilities and will have a major impact on our ability to further improve the quality of care, enhance patient safety and deliver on the mission of the Catholic Health System to continue our healing ministry," said K. David Crone, Catholic Health chief financial officer.

The bonds were underwritten by regional brokerage First Albany Capital, with a letter of credit from HSBC Bank USA and a banking group including J.P. Morgan Chase & Co., M&T Bank, Citizens Bank, First Niagara Bank, KeyBank and Greater Buffalo Savings Bank. The debt issuance, which took advantage of historically low interest rates and had more demand than it could meet, closed Nov. 29.

"CHS is standing firmly on its own two feet," said Jeff Cohen, senior vice president at First Albany.

Officials said last week's state hospital commission report, which recommended closure of St. Joseph Hospital in Cheektowaga, had no effect on the bond sale.


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