Embattled US hospital chain Tower Health has reportedly finalised plans to swap debt and secure additional funds as part of its turnaround strategy.
The healthcare provider, the trustee, and bondholders of around $992m in debt support the exchange of ‘substantially all’ existing bonds.
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According to Bloomberg, the company confirmed in a filing dated 3 June that an agreement was already signed on 31 May in this regard.
In addition, Tower Health intends to sell new municipal bonds of around $142.5m for working capital.
Bloomberg quoted a Tower Health spokesperson who stated that the final agreement is expected to close in August.
This debt exchange will provide the healthcare system with additional financial leeway by avoiding the mandatory tenders due in the coming years, specifically in 2027 and 2029.
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By GlobalData“This agreement secures substantial liquidity support and provides a longer-term window to advance our continued financial turnaround efforts,” Tower Health said in an emailed statement cited by Bloomberg.
Tower Health has further confirmed that the new agreement eliminates the requirement for lump sum payments in advance. However, the regular maturity dates remain.
Importantly, current bondholders will not incur any losses as part of the deal.
Challenges such as increased pressure during the pandemic and increased labour and supply costs were exacerbated for Tower Health by a problematic merger in 2017, which the West Reading-based system is reversing.
Earlier attempts to sell its closed Brandywine Hospital to Penn Medicine were unsuccessful. The report noted that two major rating companies downgraded the system’s debt last year from ‘CCC+’ to ‘CCC’.
However, Tower Health’s financial situation is showing improvement, with the refinancing plan receiving ‘overwhelming’ support from bondholders.
The hospital system anticipates a return to profitability in the current fiscal year, having met or exceeded its financial and growth targets.
It has also improved operating income by $100m this fiscal year compared to the previous year, alongside growth in patient volume across most service lines.
With over 10,000 team members and a combined 1,200 beds, Tower Health operates several facilities, serving communities in Berks, Montgomery, Chester, and Philadelphia Counties in Pennsylvania, US.
