Struggling Pennsylvania hospital chain Tower Health plans to exchange current debt and raise additional funds as it pursues a turnaround.
The system, trustee and bondholders of about $992 million in debt are supporting an exchange of "substantially all" existing bonds, according to a May 31 agreement that Tower Health disclosed
The system also plans on selling $142.5 million of new municipal bonds for working capital. The finalized agreement will close in August, according to a spokesperson for Tower Health.
"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.
The debt exchange will give the system additional runway by avoiding mandatory tenders next year and in 2027 and 2029. While regular maturity dates still exist, the new agreement has no lump sum payments due in advance, Tower said. As part of the deal, current holders will not be taking a haircut.
Outstanding tax-exempt debt was issued through the Berks County Municipal Authority and the Berks County Industrial Development Authority, and the Berks County Municipal Authority would be conduit issuer for the new debt, according to the disclosure document
The pressures facing hospitals during the pandemic, including sharply higher labor and supply costs, were compounded at Tower by an ill-fated 2017
But finances are improving, prompting the refinancing backed by "overwhelming" bondholder support, the hospital system said.
Tower Health said it expects to return to profitability in the current fiscal year after meeting or exceeding financial and growth targets. Operating income has improved by more than $100 million this fiscal year compared to the same period last year. The system saw "significant growth in patient volume across most service lines."
The system had an operating loss of about $193 million in the last fiscal year ended June 30.
