Originally created 03/19/03

Hospital applies for bonds

Fifty million doesn't go as far as it used to.

For the second time in less than four years, University Hospital is seeking $50 million in tax-exempt bonds to pay for capital projects that the hospital started last year or will begin later this year. Two of the boards governing the hospital, University Health Inc. and the Richmond County Hospital Authority, approved the bond issue Tuesday.

After a series of legal steps, including a public hearing tentatively scheduled for April 15, SunTrust will begin issuing the bonds May 15, said Robert Taylor, University's chief financial officer.

The hospital still has about $43 million in debt from the most recent bond issue in 1999, but carrying about $90 million for a hospital of University's size still meets the financial standard for hospitals that it is trying to meet, Mr. Taylor said.

The move allows the hospital to keep its cash on hand, which could be crucial in the "volatile" health care market, Mr. Taylor said.

"If your business dips, a cash reserve is a wonderful thing to have to ride the storm out," Mr. Taylor said.

Nonoperating income from investments has become an important source of income for hospitals across the country and investing the proceeds from the bonds could earn money for University, Mr. Taylor said.

University is looking at what is known as a seven-day "floating" rate, which is reset every week, and for the past six to eight weeks it has hovered between 1.05 percent and 1.1 percent, Mr. Taylor said.

"The current rates are unbelievably low," Mr. Taylor said. That's why some board members suggested that University get a fixed rate now in case it rises later.

"They're not going to get any lower. They can't," board member Seaborn McGarity said.

University can switch all or part of the debts to a fixed rate at any time, but when it did that with part of the 1999 issue, the interest rates went lower, Mr. Taylor said.

Still, "it's a great time to borrow money," board member J. Brewster Given said.

Reach Tom Corwin at (706) 823-3213 or tomc@augustachronicle.com.


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