The Hoboken Municipal Hospital Authority will refinance up to $12 million of tax-exempt debt into taxable bonds within the next two weeks to help cover operating expenses at the Hoboken University Medical Center in New Jersey.

The refinancing transaction will extend maturities on more than $5 million of taxable debt by three years and switch another $5 million to $7 million of tax-exempt bonds back into a taxable structure. In January 2007, the authority, which oversees the medical center, sold $51.5 million of taxable revenue bonds, including Series A for $11.1 million and Series B for $40.4 million. Officials converted the Series B bonds into tax-exempt debt earlier this year. The $51.6 million sale won The Bond Buyer's 2007 Northeast Small Issuer award in December.

Along with hospital revenues, the debt is backed by the city of Hoboken's general obligation pledge and is insured by Financial Security Assurance Inc. The credit does not carry an underlying rating.

Now, officials want to restructure $10 million to $12 million of the debt in order to use the bond proceeds for operating costs at the facility and gain liquidity by tagging on three more years on the debt's 20-year maturity. NW FinancialGroup is underwriter on the restructuring and Gluck Walrath LLP is bond counsel. Dennis Enright, a principal at NW Financial, said officials anticipate selling the bonds within two weeks and the transaction will help bring the hospital some needed cash flow.

"They've had more success than they expected in terms of admissions; therefore their costs are higher, so they needed more working capital then they expected," Enright said. "So, that plus lower reimbursements from the state have driven them towards a need for more working capital."

In looking at the medical center's earnings, the hospital generated $100,000 in surplus revenue last year.Yet officials are still working out transforming the medical center from a private entity to a public facility and taking on additional patients and business.

e_SDLqThey've done a five-year plan and they believe this infusion will be sufficient to carry them," Enright said. "And depending on what the state does with charity care reimbursements and things like that, they'll have to make adjustments as they go."

Yet city councilwoman Elizabeth Mason questioned the fiscal responsibility of refinancing the bonds. Hoboken is ultimately responsible for the debt, which depends upon state and federal reimbursements, as the facility is serving more patients as a public hospital than it did as a for-profit health-care provider.

"The main reason for moving from a private-hospital entity, Bon Secours, to a public was to get the federal and state funds, charity funds that would thus make the hospital be able to eventually grow out of its financial challenges," Mason said.

City officials created the authority to take over the troubled St. Mary Hospital, the only hospital in Hoboken, from Bon Secours in February 2007. Now called the Hoboken University Medical Center and licensed to hold 328 beds, it is the only medical facility in New Jersey owned by a municipality.

The hospital refinancing plans come at a time when state officials could be looking over Hoboken's books to help the city balance its fiscal 2008 budget, which ends June 30. The state's Local Finance Board on Wednesday told the Hoboken city council that it will begin on Monday to assist the city with its current budget, unless local officials are able to fill a $10.1 million budget gap and sign off on the fiscal plan before then.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.