SAN FRANCISCO - Nonprofit hospitals that issued debt through the California Health Facilities Finance Authority will be able to refinance the problematic variable-rate debt in their portfolios.
In a special meeting this week in Sacramento, the board of CHFFA, chaired by state Treasurer Bill Lockyer, voted to approve refinancing applications by six of its largest borrowers, for up to $4.6 billion.
The board also delegated to CHFFA staff the authority to approve similar refinancings by other borrowers without requiring the borrowers to obtain board approval.
"Today's action aims to ease the burden of these interest rate hikes on hospitals, and bring back some stability to their balance sheets so they can focus on keeping Californians healthy," Lockyer said in a statement Tuesday.
The hospital borrowers are seeking to refinance the portions of their variable-rate debt portfolios that have been harmed by recent market turmoil and downgrades to the ratings for and doubts raised about the credit quality of many bond insurers. The aftermath of that turmoil has seen the auction-rate market all but ground to a halt while interest rates have spiked on variable rate demand bonds backed by downgraded bond insurers.
CHFFA authorized refinancings for: Catholic Healthcare West, for up to $2.2 billion; Hoag Memorial Hospital Presbyterian in Orange County, for $747 million; Scripps Health in San Diego County, for $314 million; Stanford Hospital and Clinics, for $665 million; Sacramento-based Sutter Health, for $625.5 million; and Lucile Salter Packard Children's Hospital in Palo Alto, for $69 million.
Other CHFFA borrowers that need to refinance for similar reasons won't have to schedule deals around a trip to Sacramento for a board meeting.
That's because of the resolution that delegates power to CHFFA's executive director and staff to authorize similar refinancings.
"That would allow them to handle any additional requests from hospitals to get the same opportunity to convert out of their existing CHFFA variable-rate debt into something more stable," said CHFFA spokesman Joe DeAnda.
DeAnda said he did not know how much outstanding CHFFA variable-rate debt is for issuers other than the six that received refinancing authorization this week.
"The ones that came forward yesterday were some of our larger borrowers," he said Wednesday.
The decision to allow CHFFA staff to authorize refinancings is not a permanent policy change.
"This authority is not open-ended," DeAnda said. "It will expire."
CHFFA's action isn't the first designed to help hospital issuers solve their problems with variable-rate debt. In February, for example, the Massachusetts Health and Educational Facilities Authority streamlined its policies to make it easier for its borrowers to refinance variable-rate debt.