A $950 million bond to assist Ballad Health in refinancing its debt has been approved.
The Greeneville Health and Education Facilities Board unanimously approved the bond Thursday. The board has authority to issue bonds for capital projects for health care facilities and schools, similar to the Industrial Development Board’s authority to issue bonds for industrial and commercial development.
“This is important not only for Greeneville and Greene County, but for the region,” said Greeneville City Administrator Todd Smith. “This is an opportunity for the town to take a regional leadership role.”
As the issuer of a “conduit” bond, the town and the Health and Education Facilities Board have no liability or legal responsibility for payment of the bond, said Mark Mamantov, an attorney with Bass, Berry & Sims of Knoxville. He is working with Ballad Health in the effort to refinance its debt.
Ballad Health sought refinancing through a bond with a municipality or county government because of tax-exempt status and lower interest rates, Mamantov said. The bond will not affect the town’s bond rating or its ability to finance projects, he added.
The town was approached because it has one of four active Health and Education Facilities Boards in Ballad Health’s service area, Mamantov explained.
When the other three boards were approached, they were hesitant to consider the bond because each had financing of school capital projects planned or possible before the end of the year, he said.
However, when he called to inquire about Greeneville, Mamantov learned that the town was not expecting any large capital projects before the end of the year, and the process of bringing the bond resolution before the board began.
He thanked the board for meeting on relatively short notice to consider the resolution as it provides an opportunity for Ballad Health to meet next month with large financial companies.
Lynn Krutak, chief financial officer of Ballad Health, thanked the board for considering the the bond resolution for the refinancing. “This is an important transaction for us,” she said.
The refinancing is an effort to assimilate the existing debts of Mountain States Health Alliance and Wellmont Health System as the two health care systems merged to form Ballad Health, she explained.
There is no new debt involved in the refinancing. It involves bringing the existing debt of the two systems together, Krutak continued.
Through refinancing and lowered interest costs, Ballad Health can save and increase its cash flow by as much as $20 million, funds that can be used to reinvest in the health care system, the board was told.
Krutak noted that through the merger, Ballad Health has a 29-county service area in Northeast Tennessee and Southwest Virginia and is the primary provider in 21 counties.
Through the merger, Ballad Health operates 21 hospitals. Its only ongoing capital project is the construction of a new hospital facility in Unicoi County.
Ballad Health was recently given an “A-minus“ credit rating by Standard & Poor’s Global, she said, an improvement of the previous ratings for Mountain States and Wellmont, largely as the result of the merger. Later in the day Thursday, Ballad Health announced in a press release it has also received an “A” credit rating from Fitch Ratings.
In addition, the board gave authority to Smith to hold a public hearing about the bond issuance as required by federal tax law. The hearing will be on May 7.
The board also adopted a debt management policy. Mamantov explained the state now requires any governing body that issues such bonds to have such a policy.
The Health and Education Facilities Board was recently reorganized after having not met in several years during the process of updating the charter for the town, and members appointed by the Greeneville Board of Mayor and Aldermen to fill vacancies. The members include Rodney Bell, Kent Bewley, Tommy Burns, Bill Hickerson, Brandon Hull, Watson Leonard and Sam Miller.
