Case Study:Atlantic General Hospital

9733 Healthway Drive Berlin, MD 21811

Atlantic General Hospital and Health System (“AGH”) is a non-profit health care provider located in Worcester County, Maryland, and is the second largest employer in the County.  AGH has been serving patients from Maryland, Virginia and Delaware (and due to its proximity to Ocean City, MD, from around the country) since 1993. AGH’s primary facility is an acute care inpatient and outpatient 62 bed hospital located in Berlin, MD.  To better serve its community, AGH also operates several outpatient offices and ImmediCare locations throughout Worcester County.   At the time of its financing in 2017, AGH had a $113 million operating budget, $24 million of unrestricted liquidity and $23 million of outstanding debt

Project Overview

Through its financing, AGH sought to (1) refinance and consolidate seven outstanding long-term debt obligations in order to (1) realize debt service savings, (2) secure a long term credit commitment and (3) simplify its debt structure, and (2) fund up to $21 million of its “Vision 2020” strategic capital plan, which included a Regional Cancer Care Center and a new Women’s Health Center, and certain routine capital projects.

Financing Overview

After reviewing and assessing its financing options with Wye River, AGH elected to negotiate terms of its financing with its existing lender, and with guidance from Wye River, was able to secure favorable terms.  Using indicative pricing and term alternatives proposed by the lender, Wye River guided the crafting of a multi-series financing structure that was optimized to produce the lowest possible cost of capital.  The 2017 financing included one bank-qualified bond series, two non-bank qualified bond series and a taxable loan. The bonds and taxable loan were structured as variable rate obligations and AGH entered into interest rate swaps to synthetically fix the interest rate on the bonds.  As part of the 2017 Financing, AGH created an “Obligated Group” and entered into a new Master Loan Agreement with the Maryland Health and Higher Educational Facilities Authority, under which the 2017 Financing and any future parity debt of AGH will be secured.  This new structure will enhance AGH’s ability to finance future projects or take advantage of refinancing opportunities without seeking the permission of its existing lenders.

Wye River Group’s Role

Wye River had the privilege of working closely with AGH management and leadership to plan and implement the 2017 financing.  Our services included:

  • Update of AGH’s financial model and long-term projections
  • Assessment of historical and projected debt capacity
  • Review of financing alternatives
  • Negotiation of terms with AGH’s existing lender
  • Development of obligated group and master loan agreement structure and finance plan
  • Coordination and implementation of financing
  • Documentation and execution of interest rate swaps
  • Arbitrage rebate analysis for refunded bonds
  • Ongoing advisory work

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