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Montefiore Health scores $1.2 billion financing deal that will add $600 million to flagship hospital's balance sheet

The financing package is a hybrid of taxable and nontaxable bonds that will reimburse the system for more than $350 million in capital projects.

Beth Jones Sanborn, Managing Editor

Credit: Google Street ViewCredit: Google Street View

Montefiore Health System has landed a $1.2 billion financing deal with the Dormitory Authority of the State of New York that will add roughly $600 million of cash to Montefiore Medical Center's coffers.

The bonds issued by DASNY were 30-year revenue bonds that were used to pay down $315 million in prior bonds insured by the Federal Housing Administration, including bonds backed by securities guaranteed by the Government National Mortgage Association. The new bonds issued also reimburse Montefiore for $357 million in past capital project spending on its facilities and take advantage of low interest rates in the market, the system said.

The system confirmed that the revenue bonds were secured by a pledge of gross receipts of Montefiore Medical Center and a mortgage on the Moses Division's primary care facilities and its two parking garages. The new bonds were used to refinance existing bonds and loans as well as reimburse the health system for prior capital expenditures.

"The financing benefits the system by refinancing front-loaded debt to achieve a more level debt service structure and implements a flexible financing structure that can support future initiatives," a spokesperson said.

According to a recent report from Moody's Investors Service, the proceeds of the Series 2018 bonds will be used to refinance existing debt including FHA insured bonds, and will add about $600 million of cash to MMC's balance sheet.

Moody's assigned an initial Baa2 rating to Montefiore Obligated Group's $1.2 billion in revenue bonds, which are a hybrid of both taxable and nontaxable bonds. Moody's also gave a rating outlook of stable.

"Montefiore Obligated Group's Baa2 rating reflects Moody's belief that Montefiore Health System will maintain a leading market position in the Bronx, supported by its clinical excellence and its flagship position as the primary teaching hospital for the Albert Einstein College of Medicine (AECOM). Montefiore's rating also reflects its experience with value based contracting, which will be aided by integration with its large base of faculty practice and primary care physicians," Moody's said.

"With this bond rating, Montefiore can continue our leadership in developing risk-based care and delivering care in the most appropriate settings at the right time. In the rating, Montefiore was noted for its clinical excellence, care, and its ability to attract internationally renowned physician scientists, complementing Albert Einstein College of Medicine's long history of pioneering medical research," Montefiore said in a statement.

Moody's also cautioned that the system's "keen commitment to its community and surrounding counties" could mean uncertainty, as some of MHS's affiliated hospitals will experience losses despite state funding. The agency also said the med school's financial issues will require cash support from Montefiore and unusually high levels of Medicaid and a "heavily unionized" workforce will also strain the system's margins.

Montefiore is a major medical system in the New York metro area that includes three inpatient campuses with 1,558 licensed beds in the Bronx, as well as several other affiliated organizations in Westchester, Rockland and Orange Counties. Its hospitals include the 292-bed White Plains Hospital, 121-bed Montefiore Mount Vernon Hospital, 223-bed Montefiore New Rochelle Hospital, 375-bed Nyack Hospital, 242-bed St. Luke's Cornwall Hospital, and 150-bed Burke Rehabilitation Hospital. Montefiore Medicine Academic Health System is the parent above MHS that controls its Albert Einstein College of Medicine.

Twitter: @BethJSanborn
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