Providing a hospital with a funding strategy for a new facility.
A hospital needed to fund a new facility while still maintaining board-required operating reserves.
We determined that the hospital had three options on the table: Exhaust reserves completely (not really an option since the board required 100-plus days of operating cash). Borrow money through a municipal bond offering. Or access a bond offering, but use the proceeds to solve other needs. Since none of these options alone met the hospital’s goals, we had to find a new solution.
There was a better solution. The first step was to solve the need for new funding. In the end, we used the hospital’s reserve fund to establish a securities-based loan for $19 million. This freed up the reserves to grow to a level where the hospital could achieve an investment-grade rating.
Second, we used our proprietary asset allocation modeling to create the best optimized results (the mix of investments that would achieve the best return at the lowest amount of volatility). We found we could increase their “free return” (income and dividends received as investment income) by high seven figures. This provided more than enough income to offset the borrowing cost.
We were able to help the hospital fund its goals of developing the new facility and reserving the mandatory 100 days of operating cash, while also addressing its short-term need to provide for a new facility.