News Column

Standby tax included in Natchez Regional bankruptcy plan

August 28, 2014

By Vershal Hogan, The Natchez Democrat, Miss.

Aug. 29--NATCHEZ -- A 5-mil standby tax is included in a proposed plan for Natchez Regional Medical Center to pay its debts.

The plan, filed Thursday, says the hospital will take out a loan of no more than $3.5 million to pay off the revolving note loan the county-owned hospital has with United Mississippi Bank as well as "certain obligations of the hospital."

The collateral backing the loan is a 5-mill tax levy by Adams County and the accounts receivable the hospital will collect for its final months of operation.

The hearing for the plan is set for 9 a.m. this morning in federal bankruptcy court in Jackson.

The loan is needed to cover the cash flow issue that arises from the sale of the hospital needing to be completed before all of the accounts receivable can be collected, Adams County Board of Supervisors Attorney Scott Slover said.

The amount of accounts receivable expected from the hospital is approximately $5 million, Slover said.

"We believe the accounts receivable will cover the costs," he said. "We should have a good idea about that by March 2015 to know what the accounts receivable and additional funds from the bankruptcy estate look like."

If the accounts receivable does not cover the cost of the loan, the balance will be released from the $4 million escrow set aside from the sale proceeds, Slover said.

The escrow account will be set aside to cover any liabilities the hospital may face following the Sept. 30 close of the hospital's anticipated sale to Community Health Systems, which has signed an agreement to serve as a stalking horse bidder at the hospital's auction Sept. 11.

The escrow account has to stay in place for two years, Slover said.

"There is a millage pledge, but even if we need to utilize it I don't think the amount needed will be anywhere close to the 5 mills," he said.

Supervisors' Vice President Mike Lazarus said even though the millage should never have to be activated, backing the loan was "a bitter pill to swallow."

"We have to do what we have to do to close the sale," he said. "The hospital can't stay open for another month, so we have to stay on schedule. I hate it has come to this."

NRMC currently has a 5-mill standby tax that was required by the Mississippi Development Bank when the hospital refinanced its bonds. The bonds will be paid off in the sale, so the standby will in essence transfer to the new note.

That's why the loan option is important, Supervisors President Darryl Grennell said.

"I prefer this option much, much more than to not close the sale and have a default on those bonds and we have to put the burden on the taxpayers for the next 17 years," he said. "That's what our financial advisor called a nuclear bomb, and we certainly don't want that."

The county does not have any other proposed input in the bankruptcy plan aside from the 5-mill collateral, Lazarus said.

The new loan will have a 5 percent interest rate. The first note on the loan will be due Oct. 1, 2015.

CHS has put forward an initial bid of $18 million for the hospital and signed an agreement that will automatically close the sale of the hospital with CHS should no other bidder step in at auction. Hospital officials have previously said they do not expect a second bidder.

CHS already owns Natchez Community Hospital.


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Source: Natchez Democrat, The (MS)

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