A heavy hitter in municipal financing has been tapped to help close the sale of Roger Williams Medical Center and Our Lady of Fatima Hospital.
The Rhode Island Health and Educational Building Corp., the quasi-public agency issuing the debt on behalf of buyer The Centurion Foundation, brought on Bank of America this week to co-manage the bond sale, according to Christopher Hunter, an agency spokesperson. The update was first reported by WPRI-TV 12.
Centurion, an Atlanta-based nonprofit, has struggled to lure investors to back the $150 million in taxable and tax-exempt bonds needed to buy the pair of safety-net urban hospitals. Already, Rhode Island Attorney Peter Neronha, who reviewed the transaction under the state’s Hospital Conversations Act, has eased up on the conditions imposed on the deal three times to make it easier for Centurion to finalize its purchase.
As the nation’s largest underwriter of municipal bonds, Bank of America was brought on to assist Barclay’s, the existing bond underwriter, to market the bonds to inventors, Hunter told the Rhode Island Current in a text message Thursday night. And, now the bond will move from a limited public offering to private placement, a move that further limits the investor pool but avoids more stringent federal registration and regulation requirements.
“A private placement will allow additional flexibility in marketing and selling the bonds to a group of highly specialized investors,” Hunter said.
Bank of America was one of eight companies that responded to the Rhode Island Health and Educational Building Corp’s request for proposals seeking manager and co-manager for Centurion’s bond financing, according to Oct. 16, 2024 meeting minutes. Barclays, another respondent, was chosen as the senior manager for the bond issue at the same meeting, while an option for a co-manager was deferred, with the agency’s executive director empowered to make a decision.
Hunter said Friday that identities of the other companies that submitted proposals could not be shared without a formal public records request. Rhode Island Current submitted the records request Friday morning.
Executive Director Dylan Zelazo told the board at its meeting on Thursday that he had brought on Bank of America to serve as co-senior managing underwriter for the bonds. There was no discussion of the decision, Hunter said. A recording of the meeting was not immediately available.
A spokesperson for Bank of America’s Global Markets segment, which oversees municipal banking and investments, did not immediately respond to inquiries for comment.
The bonds were previously scheduled to close by Oct. 31, after multiple delays and changes to the terms of the transaction. Now, that deadline has been pushed back, although a new date has not been set, Otis Brown, a spokesperson for CharterCARE Health of Rhode Island, Centurion’s Rhode Island subsidiary, said in an email Friday morning.
“Centurion’s commitment to complete the sale has not changed,” Brown said.
Nor have the underlying financial and economic factors that are making it difficult to sell the bonds in the first place.
S&P Global Ratings Agency noted “significant uncertainty” in the financial and operational performance of Centurion’s bonds in a March 25 ratings assessment, giving the bonds a BB- rating which denotes relatively high-risk for a non-investment grade bond. The rating was affirmed by S&P in August.
The unfavorable credit assessment largely reflects the status of the hospitals’ current owner, Prospect Medical Holdings, which filed for Chapter 11 bankruptcy in January. The LA-based hospital chain operator’s mismanagement of its hospitals is well-documented, largely attributed to former majority stakeholder Leonard Green, a private equity that drained the accounts of health care facilities nationwide to pay out investors and executives, according to a U.S. Senate Budget Committee report in January.
Roger Williams and Fatima remain on the brink, posting a $60 million operating loss for fiscal 2023 with projections for multimillion-dollar losses in fiscal 2024, alongside staffing and equipment shortages and safety problems posed by overdue infrastructure repairs.
And the bleak financial forecast doesn’t account for federal spending cuts, which are expected to hurt hospitals nationwide by reducing Medicaid enrollment and curtailing state aid and tax breaks.
Yet proponents of the sale insist Centurion is the only hope for keeping the critical health care services from closing — an outcome that would add even more strain to the state’s fragile health care landscape.
The two hospitals in Providence and North Providence, with 500 beds between them, account for more than 50,000 emergency room visits per year. Together they have 104 beds for behavioral health patients, representing more than 20% of behavioral health beds available statewide, and employ 2,700 people.
“The Attorney General understands that Centurion continues to work to close the deal, but believes that it must happen very soon to ensure that the plan endorsed by the bankruptcy court is not upended,” Tim Rondeau, a spokesperson for Neronha’s office, said in an emailed response Friday.
The return to nonprofit status under Centurion could let hospitals recoup donations given to a charitable foundation formerly tied to the facilities. Earlier this month, CharterCARE Health asked the similarly named, but distinct, Chartercare Foundation for a “return” of donations that were intended to support the hospitals. The two entities were initially linked, but separated in 2014 when Prospect bought the hospitals, shifting them from nonprofits to for-profit entities no longer able to accept tax-exempt charitable foundations.
The foundation’s board of directors is still reviewing the request, Paula Iacono, the foundation’s executive director, said in a email Friday.
This story was originally published by the Rhode Island Current.
