New Samaritan, Mansfield Center for Nursing and Rehabilitation

goals

New Samaritan Corporation owns and operates Mansfield Center for Nursing and Rehabilitation, a 98-bed skilled nursing facility located in Storrs, Connecticut. The Corporation had issued tax-exempt bonds in 1993 to finance the construction and development of this facility. The bonds, with an average rate of 5.98%, were currently callable at par. In addition, Mansfield Center’s outstanding bond covenants required the maintenance of significant funds to be held at the trustee, which limited the Corporation from controlling investment of the funds.

Mansfield Center

the solution

New Samaritan engaged Sims to refinance its bonds in order to reduce its debt service costs through the issuance of tax-exempt variable rate bonds enhanced with a bank letter of credit. In addition, Sims structured the refinancing to eliminate all trustee-held funds and required reserves. Lastly, Sims structured the bank terms to insure a reduction in required insurance.

the implementation

Through a competitive process, Sims obtained five letter of credit proposals to enhance the bond issue. Sims negotiated extremely favorable terms for New Samaritan Corporation, including an initial letter of credit term of seven years and low upfront and annual fees. The bonds, issued through the Connecticut Health and Education Facilities Authority with a par amount of $7,095,000, were structured with a variable rate of interest. To mitigate interest rate risk, Sims also secured a 7-year swap for New Samaritan at a rate of 3.938%

the result

New Samaritan realized the following benefits from the refinancing:

1. Annual debt service savings of approximately $135,000
2. Net present value savings of $413,000
3. Release of more than $1.70 million of trustee-held funds which are now being invested at more favorable yields, which are expected to generate an additional $90,000 annually
4. Liability insurance levels that were reduced by 50%, significantly reducing the annual premiums

Peter Atherton, Chief Financial Officer of New Samaritan Corporation, is excited about the expected contribution to the bottom line made possible through his company’s partnership with Hebert J. Sims. He states that “between a reduction in the interest rate on the debt and the release of reserve funds required under the prior loan agreement, we expect to reduce interest expense, reduce insurance premiums and improve interest income by approximately $250,000 a year. Sims deftly lead the Company through the refinancing process which will make these results possible.”