BRADENTON, Fla. - A community hospital in Florida is poised to sell out to a for-profit chain and redeem its junk-rated bonds.
If the deal is consummated, it will also solve years of legal in-fighting between two governing boards.
The Citrus County Hospital Board and the Citrus Memorial Health Foundation Board of Directors notified bondholders Oct. 2 that they are negotiating with Hospital Corporation of America for the sale or lease of their 198-bed hospital.
About $38.5 million of Series 2002 bonds were outstanding at the end of fiscal 2012.
In May, Fitch Ratings downgraded its rating to B from BB-minus on bonds issued for Citrus Memorial Hospital. Moody's Investors Service dropped its rating to B3 from Ba3 in March.
The hospital also has another $18.75 million of unrated, long-term debt in private placements with two banks.
"Once a decision is made on the structure of the transfer, both boards will then collectively enter into a letter of agreement with HCA," the material event notice said. "A closing date in the first quarter of calendar year 2014 is anticipated with the likely redemption of all outstanding debt of the system to occur contemporaneously or shortly thereafter."
The board contracted with the foundation to run the hospital but for years they fought each other in and out of court over the governance of the hospital, and a local tax collected to support hospital operations and debt.
In 2011, Gov. Rick Scott signed a bill reorganizing the foundation's governance structure by giving greater control over day-to-day operations to the hospital board, and the issue has been tied up in court ever since.
The Florida Supreme Court is scheduled to hear oral arguments in November over the validity of the bill, according to the Citrus Chronicle newspaper. It is not clear if the case will be heard now that the boards have reached agreement on future control of the hospital.
The Chronicle said HCA's offer to the boards includes the payment of $140 million, which also covers funds for debt and pension obligations, in addition to paying $2 million a year in property taxes and investing another $45 million in capital.
The local tax subsidy would be eliminated in the sale or lease deal, and all employees would be retained by HCA, the paper said.
The hospital is in Inverness about 75 miles north of Tampa.