A rural Oklahoma hospital authority is eyeing an exit from Chapter 9 bankruptcy with a plan that would fully pay outstanding principal and interest on revenue bonds sold in 2007.
A U.S. bankruptcy judge in the Eastern District of Oklahoma has set a March 23 hearing on the Atoka County Healthcare Authority’s disclosure statement, which proposes treatments for various creditors, including bondholders.
The authority sold $10 million of unrated, tax-exempt bonds backed by a county sales tax and other hospital revenue and assets to build a replacement medical center in the southeastern corner of Oklahoma. A federal loan was also used to finance the Atoka County Medical Center, which was completed in 2009 with expanded surgical and outpatient specialty services for the county of about 14,000 residents.
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The authority is one of only four municipal borrowers currently in Chapter 9 bankruptcy, Municipal Market Analytics reported this week.
With the hospital’s finances stabilized after undertaking cost-cutting and other measures and with the adoption of an internal leadership structure, the authority proposed the reinstatement of the bonds and bond documents covering the outstanding principal of $7.655 million, along with interest, which totaled $169,048 through Feb. 1.
In a recent disclosure notice posted on the Municipal Securities Rulemaking Board’s EMMA website, UMB Bank, the trustee for the bonds, said the plan includes a temporary deviation from the bond documents.
“Specifically, those terms of the bond documents that require the authority to make monthly deposits with the trustee to restore the reserve fund to the reserve fund requirement (as those terms are used in the bond documents) would be suspended until the first full month commencing after the one-year anniversary of the effective date,” the notice said. “ If there is any deficiency in the reserve fund during this interim period, that will persist until this deviation from the bond documents expires and the authority thereafter remits any needed deposits to restore the reserve fund to the reserve fund requirement.”
The authority would also pay off a $6.75 million loan from its other secured creditor, the U.S. Department of Agriculture, over 40 years at an annual interest rate of 2.215%, according to the disclosure statement.
It also said that as of Feb. 7, the hospital had an available operating cash balance of $365,873 and provider relief funds of about $3.91 million, noting that at the end of 2016, the available cash balance was only about $30,000.
The court set March 11 as the final day for creditors to object to the disclosure statement.
