TOM MORTON Star-Tribune staff writer | Posted: Friday, July 29, 2005 12:00 am
People refinance their home loans to get a better deal on interest rates, reduce their monthly mortgage payments and free that money for other things.
The Wyoming Medical Center did something similar to that Thursday afternoon with $30.3 million of bonds, which will save between $2 million and $2.4 million over the next 19 years.
"The $2 million goes back into operations," Wyoming Medical Center President and CEO Pam Fulks said after the special meeting of the Natrona County Commission in the county annex. "It's money we can spend on other things other than debt service."
However, WMC's bond swap scheduled to be fixed at 10:30 a.m. today proves far more complicated than your home loan.
Instead of a two-party relationship between you and your financial institution, Terry Casey of RBC Dain Rauscher in Denver said the bond swap involves three parties: the Wyoming Medical Center, a lending institution that offers a variable interest rate, and another entity that offers a fixed rate.
Unlike you and your home loan, the WMC answers to two governmental entities that needed to approve this deal.
So Thursday, the Natrona County Commission - with commissioner Kathleen Dixon serving as a temporary chairwoman - met to hear from municipal bond attorney Barbara Bonds of the Cheyenne firm of Freudenthal, Salzburg and Bonds.
"The purpose is to save interest costs and achieve other economies," Bonds said.
While the WMC has the bonds, she said a bond swap needed the approval of the related highest governing body.
However, the county is not liable, she and Casey said.
The Wyoming Medical Center - with a nine-member board of directors - leases the hospital land and buildings owned by Natrona County board of commissioners in exchange for providing prisoner and indigent care. The lease is overseen by a five-member board of trustees of the Memorial Hospital of Natrona County.
All three boards attended Thursday's meeting.
Bonds was involved in the $31.8 million revenue bond issue in 1995, when interest rates were about 6 percent.
In 2003, the hospital refinanced that bond issue.
Both those actions were folded into the 2005 bond swap, which involves a change in the Internal Revenue Service Code about financing for nonprofit 501(c)3 corporations, Bonds said.
In further explaining the swap, Casey told commissioners that the IRS change allows nonprofits to issue nontaxable bonds, something that couldn't be done in 2003.
That involves a transaction involving a fixed rate from the WMC to RBC Dain Rauscher - a subsidiary of the Royal Bank of Canada - and a floating rate RBC offers to the hospital. Then the hospital pays a variable rate to the third party, Scotiabank of Nova Scotia, Casey said.
This sets up a "synthetic rate" that locks in the rate, which was set at 3.45 percent, he said.
The rate may be lower today, which would realize even more savings for the Wyoming Medical Center, Casey said.
While talks about refinancing have gone on for months, the WMC directors, the Memorial Hospital board of trustees and the county commissioners needed to act Thursday, Bonds and Casey said.
So the commissioners formally recessed.
Then Wyoming Medical Center board chairman Mike Reid called a special board meeting at the back of the county annex meeting room.
After the WMC board approved the resolution calling for the bond swap, the Memorial Hospital trustees called their own meeting, and approved a similar resolution.
After they were done, the county commission returned from its recess and approved the bond swap.
These actions will enable hospital and lending officials to fix the rate.
"The action was to authorize me to do this," said the WMC's chief financial officer Ed Renemans.
While the Wyoming Medical Center has the obligation to pay for the bonds, due Sept. 15, 2024, the Ambac bond insurance company has insured the bonds, Casey said after the meeting.
The deal will be good for everyone, he said.
"We're taking advantage of inherently lower interest rates and locking them in," Casey said.
Reporter Tom Morton can be reached at (307) 266-0592, or at Tom.Morton@casperstartribune.net.