At a time when many acute care hospitals in New Jersey are struggling financially, Capital Health System, a healthcare delivery system serving central New Jersey and eastern Pennsylvania, and long-time Lindabury client, required financing for its state-of-the-art 223-bed acute care hospital in Hopewell Township. Capital engaged Lindabury to serve as its financing counsel.
For Capital, the timing of its project could not have been worse: the meltdown of the financial markets in autumn, 2009, severely restricted its ability to engage in traditional tax-exempt bond financing for the new facility. The financing team considered several alternatives and decided that the best was a taxable loan under the Federal Housing Administration’s (FHA) Section 242 Hospital Insurance Program.
The FHA financing required the advance refunding of all of Capital’s existing tax exempt bonds. The collateral package for the FHA financing included sixteen parcels of real estate located in three different municipalities. In addition, numerous complex letters of credit, some requiring additional collateral, were required. A team of Lindabury lawyers, including Robert S. Burney, Richard R. Width, and Monica Vir worked closely with Capital’s General Counsel, Jan H. Gabin, and its special real estate counsel to navigate the complex and stringent requirements of the FHA financing.
The result was the successful closing of the largest single transaction in the history of the FHA and the largest hospital financing ever in New Jersey. The $756 million mortgage loan will permit Capital to complete construction of its state-of-the-art 223-bed hospital and also allowed it to refinance its existing tax exempt bonds on favorable terms during a period of credit uncertainty. The new hospital will create several thousand new jobs and provide much-needed economic stimulus in Mercer County. It will also enable Capital to implement its long-term strategic business plan and will make the highest quality patient care available to the residents of central New Jersey.
Despite the significant changes in the structure of the financing, and the challenges presented by a transaction of unprecedented size and complexity, the Lindabury team brought value to the client by working efficiently: the final legal fee from the firm was 12% under the original estimate.