Rice Memorial Hospital in Willmar, Minn., to refinance bonds from 2002 expansion
WILLMAR -- Rice Memorial Hospital will save about $250,000 a year in debt service by refinancing bonds issued in 2002 for a major expansion and renovation.
At a meeting Wednesday, the board of directors for the city-owned hospital adopted a resolution outlining the terms of the sale.
Final approval is pending from the Willmar City Council, which has already essentially endorsed the hospital's plan to refinance the debt.
The amount to be refunded won't exceed $47 million, and net savings must be at least 3 percent or better to formally go ahead with the sale, scheduled to take place in February.
The gain to Rice is an immediate savings in the amount it spends on debt service each year, said Bill Fenske, chief financial officer. More room also will be created for any future borrowing the hospital might undertake for capital improvements, he said.
"That'll give us a little more flexibility down the road if we need to issue debt for new projects," Fenske said.
The 2002 bonds represent one of the largest projects ever undertaken at Rice: construction of two new patient floors, a new emergency department and new surgery department; major renovation of most of the hospital's existing space; and demolition of the original 1937 wing to make room for parking.
Refinancing the bonds will not alter the covenants that were set up with the city of Willmar to ensure the hospital has enough money on hand to meet the payments, Fenske said. "The city was not comfortable with making any changes and that's acceptable to us."
The life of the bonds also will remain the same, at 20 years, he said.
Hospital officials have explored for several months whether to refinance the bonds in order to realize lower interest costs. But it wasn't until recent months that all the factors lined up favorably enough to move forward.
"It has become much more attractive to do this," said Mike Schramm, chief executive.