CapitalSource, one of the leading commercial lenders in the United
States, said today it is providing a $71 million senior loan to Tri-City
Medical Center, a 397-bed, acute care hospital serving the North Coastal
San Diego region of California.
“We appreciate the opportunity to help Tri-City ensure it maintains its
status as a preferred hospital for care and treatment in Southern
California”
The financing includes a $51 million secured term loan and a $20 million
revolving line of credit. The hospital, owned by the Tri-City Healthcare
District, is using the term loan to repay high-interest Auction Rate
Securities (ARS) debt and ensures a consistent, predictable cost of
debt. The accounts receivable-based line of credit is being used for
working capital and planned capital expenditures, including the
build-out of a medical office building for its physicians.
The hospital considered several options for refinancing the ARS before
turning to CapitalSource. The traditional source of outside financing
for public healthcare providers (including Hospital Districts) has been
through the bond markets. While other commercial banks and lenders shied
away from working with a public hospital, CapitalSource pursued the
opportunity, engaging California counsel to do an exhaustive review of
the California Code regarding lending to a government entity.
CapitalSource was able to successfully meet the challenges of financing
a public healthcare provider under California law.
“CapitalSource executed a creative, comprehensive solution to our
financing needs,” said Larry Anderson, CEO of Tri-City Medical Center.
“The structure of this transaction alleviates the instability in our
cost of financing and gives us the liquidity to move forward with
planned capital improvements and other initiatives.”
“We appreciate the opportunity to help Tri-City ensure it maintains its
status as a preferred hospital for care and treatment in Southern
California,” said Patrick Coffey, Managing Director, Healthcare Credit
for CapitalSource. “This transaction is a great example of the type of
relationship we value and we appreciate the opportunity to work with a
fine management team led by Larry Anderson who is a seasoned CEO with
extensive acute care hospital experience.”
CapitalSource has underwritten hundreds of healthcare transactions since
its inception for all types of healthcare service providers (including
acute care hospitals, skilled nursing facilities and rehab hospitals)
real estate owners, and manufacturers and distributors of medical
supplies and equipment. Its Healthcare Credit Group provides both cash
flow and asset-based senior loans ranging from $5 million to $100
million.
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