Oklahoma hospital authority closes deal to end default

Norman Regional Health System

Just over a month after missing a Sept. 1 debt service payment, Oklahoma's junk-rated Norman Regional Hospital Authority closed on a $40 million senior bond sale to majority bondholders, who had agreed to a default waiver, according to a disclosure notice.     

Some of the proceeds from the tax-exempt bonds, which mature Sept. 1, 2031, and carry a 7.5% interest rate, will be tapped for the delayed payment on revenue bonds the authority issued in 2016, 2017, and 2019, bond trustee Argent Trust Oklahoma said in a notice posted Friday on the Municipal Securities Rulemaking Board's EMMA website.

Bondholders were provided liens and security interest in the authority's real and personal property with the 2026 bonds taking priority over the previous three outstanding issues. An existing $35 million line of credit that matured on Sept. 1 was converted into a five-year note.

In a statement on Tuesday, Norman Regional Health System said it improved its financial performance by $38 million in fiscal 2026 and put a new leadership team in place. 

"We have made many difficult decisions, improved our operations, and achieved meaningful financial progress," Dr. Aaron L. Boyd, the health system's president and CEO, said in the statement. "This financing provides the liquidity needed to build on that momentum and continue moving Norman Regional toward a stronger, independent and more sustainable future."

The bond trustee in a Sept. 4 disclosure notice said while nonpayment is an event of default and bond documents do not include a formal grace period, a short-term forbearance was granted for the payment at the direction of majority bondholders.

S&P downgraded the authority to D from CC last month after launching a CreditWatch negative review on Aug. 31. At that time, the rating agency dropped its long-term rating to CC from CCC due to uncertainty over when or if the $7.1 million principal and $4.9 million interest payment would be made.   

Moody's Ratings placed the authority's Caa2 rating under review for a potential downgrade on Sept. 11, citing the defaulted payment. 

The move "reflects uncertainty regarding NRH's financing plans, legal structure of the new bonds relative to outstanding debt and its strategy toward achieving financial sustainability,"  Moody's said. 

"It further incorporates the organization's already thin liquidity with about 10 days cash on hand and heavy reliance on a short-term line of credit, which is fully drawn and currently exceeds total unrestricted reserves," it added.

At issuance, the authority's 2019 bonds were rated A-minus by S&P and Baa1 by Moody's.

The health system, which provides services at multiple campuses in south central Oklahoma, had $247.45 million of outstanding bonds from the three previous issues as of June 30, 2025, according to its latest annual report.