| Debt Management |  |
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An organization's debt management function can run the gamut from the routine periodic circulation of continuing disclosure information to investors and lenders to complex workouts of covenant defaults. First River Advisory has "been there and done that" for several clients. The description below provides a generalized picture of our approach to advising on debt management issues - the specific actions we take for each client may vary.
ROUTINE SERVICES
First River Advisory's debt management engagements are tailored to the needs of each client, but typically include the following tasks:
- Dissemination Agent for continuing disclosure reports;
- education of new senior executives and financial management staff regarding outstanding debt instruments;
- maintenance of relationships with bondholders, banks and other financial stakeholders;
- cultivation of new sources of credit;
- maintenance of relationships with master and bond trustees;
- assembly of project cost requisitions and other development period activities;
- preparation for annual rating updates;
- periodic calculations of maximum annual debt service requirements;
- advice on strategies to comply with financial covenants;
- periodic updating of financial covenant summaries;
- review and comment on monthly financial and statistical reports;
- supply of data and other input to support the annual budgeting process;
- review and comment on audit footnotes relating to debt instruments and derivatives;
- advice on debt related compliance issues;
- arrangement for arbitrage rebate calculations;
- annual completion of Schedule K of IRS Form 990;
- monitoring of the credit quality of financial institutions to which clients have credit exposure; and
- advice on implications for the client's debt instruments of potential affiliation initiatives.
DISSEMINATION AGENT
First River Advisory currently assists Oaklawn Hospital and Flagler Hospital fulfill their continuing disclosure obligations by serving as Dissemination Agent. In addition to its usual role, First River Advisory implemented Oaklawn's investor relations website which went "live" in January 2017. First River Advisory takes a "hands-on" approach to the preparation of continuing disclosure reports to ensure completeness, and presents the information in a clear and consistent fashion. First River Advisory had served as Dissemination Agent for several other hospitals over the years until their bonds were redeemed in connection with refundings or mergers. First River Advisory also arranges and organizes conference calls with the beneficial owners of Oaklawn's and Flagler's bonds and other financial stakeholders.
DEFAULT WORK-OUTS
First River Advisory has gained the experience and know-how to represent health care organizations which have encountered any debt-related predicament. First River Advisory has become particularly adept at negotiating forbearance agreements which contain escape clauses so that borrowers can emerge from defaults with formal waivers that enable releases of audited financial statements without qualified opinions. Even while vigorously representing its clients' interests, First River Advisory has earned the respect of those on the other side, especially institutional investment analysts, so that viable solutions can be negotiated expeditiously and then implemented efficiently.
REPRESENTATIVE CLIENT ENGAGEMENTS
Over the past several years, First River Advisory has assisted the following organizations and others in addressing various ongoing debt-related issues involving all types of participants in the tax-exempt bond market — high-yield and other institutional bond investors, banks, bond insurers, rating agencies and swap counterparties:
- Glens Falls (NY) Hospital: negotiation of forbearance agreements, default waivers and amendments related to senior debt financial covenant compliance; negotiation of the release of a mortgage on an outpatient dialysis facility to facilitate the divestiture of that business line
- Dickinson County (MI) Healthcare System: arrangement of a refinancing transaction to avert a potential default on an upcoming balloon payment
- Munising (MI) Memorial Hospital: negotiation of a temporary extension of an expiring letter of credit, and the subsequent negotiation of an interim four-year solution (for which a permanent solution was implemented in January 2016)
- Hillsdale (MI) Hospital: negotiation of waivers of events of default and forbearance agreements with institutional bondholders, arrangement for a management consultant and arrangements for the optional redemptions of outstanding bonds
- Hills & Dales General Hospital (Cass City, MI): performance of a comprehensive review of outstanding debt for the purpose of identifying and evaluating refunding and restructuring opportunities and assessing the organization's capacity to incur additional debt, all of which resulted in a transaction which refunded outstanding debt and funded a facilities improvement project
- Marquette (MI) General Hospital and Garden City (MI) Hospital: management of the disposition of outstanding indebtedness, closing logistics and funds flows in connection with each organization's respective asset sale to different investor-owned concerns
- NORTHSTAR Health System (Iron County, MI): negotiation of waivers of events of default and forbearance agreements with institutional bondholders represented by a successor trustee, and representation regarding the disposition of NORTHSTAR's outstanding debt in connection with its merger into a larger non-profit health system
- Oaklawn Hospital (Marshall, MI): resolution of a default by its swap counterparty and the restructuring of another interest rate swap to conform more closely to the associated debt instruments, negotiation of waivers of events of default with institutional bondholders, assistance to new financial management staff regarding debt management, and analyses to support decisions as to whether to exercise interest rate swap termination options
- Oaklawn Hospital, Flagler Hospital (St. Augustine, FL), Marquette General Hospital and Ottumwa (IA) Regional Medical Center: restructurings of outstanding debt precipitated by failed auction rate securities and downgraded bond insurers; Oaklawn's was the first such transaction ever.
