Hospital sees big savings
The sale of bonds to refinance $34,385,000 owed on the original bond issue for the Adams Memorial Hospital (AMH) went off without a hitch last week and early results show hospital officials should realize even greater savings than originally anticipated — nearly $3.5 million.
The Indiana Bond Bank conducted the sale of bonds on September 19 and it took approximately 90 minutes to complete the transaction.
Per the desires of the hospital board of trustees and the Adams County Council, the early portion of the sale was designated for local investors who wished to get in on the purchase of bonds. AMH President and Chief Executive Officer Tom Nordwick told trustees on Wednesday night at their regular monthly meeting that while it appeared no local investors were involved, there were orders exceeding $54 million in bonds from 21 institutional investors.
Nordwick said that Indiana investors alone purchased $5.035 million worth of those bonds.
The bonds were a good buy, according to AMH Chief Financial Officer Dane Wheeler because they had a Standard and Poor's rating of AA, a rating he said was "exceptional" for such a refinance issue.
Cash flow savings in the refinance come to $6,756,116 but, again, Wheeler cautioned "that's at today's dollar value and the value next year won't be what today is." Wheeler said prior lease payments would have come to $55,835,288 but the new lease payments will total $49,079,172. In the first year alone, what would have been a payment of $1,853,821 has been slashed to $305,598.
Wheeler explained to trustees that the tax-exempt bonds will reach a final maturity on February 1, 2033 but during that time frame, the refinancing will save the hospital a whopping $3.47 million in net present value. He added that when the board originally decided to refinance the bond issue, it was estimated the savings would come to a little over $2 million so the timing and rates involved turned out to be very much in the hospital's favor.
The sale of bonds was advertised in Decatur, Fort Wayne, Berne, and Bluffton newspapers and was handled by the Raymond James/Morgan Keegan firm.
People holding bonds under the original bond issue will be reimbursed in August of 2013. Bonds sold last week will realize an interest of 0.620 percent in the first year up to 3.680 percent in the final year of the bond issue.
Nordwick praised the efforts of Wheeler in preparing for the refinance. noting, "He put in a ton of hours on this project."