University Hospital opts for fixed-rate bonds

University Hospital is switching $151 million in bonds from a variable to a fixed rate in hopes of getting away from a volatile and unpredictable market where rates can fluctuate from 3 percent to 15 percent at times.

University Health Services Inc. approved the move Thursday, clearing the way for University to lock in a fixed rate of 5.25 percent.

"It's like moving from an adjustable rate mortgage to a fixed rate mortgage," Chief Financial Officer Dave Belkoski said. Closing is set for early December.

University had about $135 million in variable rate demand bonds that were backed by a letter of credit from SunTrust Bank. With all of the fees considered, the rate could swing anywhere from 3 to 15 percent, Mr. Belkoski said.

And that was not to University's liking, said J. Larry Read, CEO of University Health Care System.

"We don't want the volatility," he said.

"It takes risk off our balance sheet," Mr. Belkoski said. "It take risk off the organization."

The move combines and replaces bonds the health system issued in 1999, 2003 and 2008, he said.

With health care reform looming in Washington, the future for health institutions is more uncertain and rating agencies earlier this year downgraded the industry as a whole, Mr. Belkoski said. University, however was able to achieve a stable outlook from the rating agencies it went to, he said.

"We're really beating the odds on the health care side," Mr. Belkoski said.

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