New Jersey Health Care Facilities Financing Authority Approves $2.5M loan to Hoboken Municipal Hospital Authority

New Jersey Health Care Facilities Financing Authority aproves $2.5M loan to Hoboken Municipal Hospital Authority

September, 2011 - by Ed Mecka -

The Hoboken Municipal Hospital Authority has requested a $2.5 million loan from the Authority to fund the continued operations of the Hoboken University Medical Center (“HUMC”), which is currently owned by HMHA, until the planned sale of HUMC to a company known as HUMC Holdco can be completed. The sale is expected to be completed by the end of September 2011. The loan will be secured by a subordinated pledge of the Revenues of HMHA, including an $11 million State appropriation to HMHA, which will not be available to HMHA until the sale is closed. The loan will be made from the Authority’s fund balance, which is currently over $4 million.

Appearing on behalf of the Hoboken Municipal Hospital Authority were Geroge Crimmins, Executive Director of the Hoboken Municipal Hospital Authority, Eric Kurta, a Member of HMHA, as well as Andy Aronson and Lynn Besancon from Gluck Walrath, bond counsel to the HMHA, and Perry Manderino from PriceWaterhouse Coopers, financial advisor to HMHA.

HMHA has been seeking a purchaser for HUMC for approximately one year. It received several offers and in January, after an extensive review process, selected to pursue the offer from HUMC Holdco, LLC. HUMC Holdco is a for-profit limited liability  company that has the same principals as the organization that purchased Bayonne Medical Center in 2008.

The Certificate of Need process for a transfer of license is underway and is expected to be completed by the end of August. Because HUMC is owned by a Municipal Hospital Authority, no review by the Attorney General’s office is required pursuant to the Community Healthcare Assets Protection Act (“CHAPA”).

A loan resolution, draft loan agreement and note were distributed earlier this week. The terms for the proposed loan are as follows:
The term will be ninety (90) days with the possibility of one ninety (90) day extension at the sole discretion of the Authority.
The Authority will receive a subordinated security interest in the Revenues of the Hoboken Municipal Hospital Authority including the proceeds of the State’s fiscal year 2012 appropriation in the amount of $11 million.

Interest will be at a rate equal to the New Jersey Cash Management Fund interest rate as of the first day of each previous month plus 200 basis points (2%), adjusted monthly.

Payment of all principal and interest shall be due no later than the last day of the term (i.e. 90 days if not extended, or 180 days if extended). HMHA may prepay the loan at any time without penalty.

Staff recommended approval of the resolution authorizing the loan to the HMHA.  Mr. Bollaro asked if the requested $2.5 million was the total amount required until the sale. Mr. Hopkins answered that the initial request was for $4.5 million, but the Authority does not have that much on hand but there are other mechanisms in the works to get that other $2 million that is needed to complete the sale.
Mr. Escher asked if the Authority loan was dependent on them receiving the other $2 million. Mr. Hopkins responded that they would receive the $2 million first otherwise the loan would not be given. He added that the risk to the Authority would be if the sale didn’t close because the revenues would be coming from the sale. The State appropriation will only be available if the deal closes. The Authority has a fairly high level of comfort that it will happen.

Mr. Conroy added that his department has been working very closely with the Authority and with the city to support the process and the application. Next week, the State Health Planning Board will be reviewing the Certificate of Need application, and staff will be offering their set of recommendations which are imminent. Because of the timing, he will recuse himself during the vote on this resolution.

There were no further questions. Dr. Kazmir made a motion that the Authority approve the resolution regarding the loan to Hoboken Municipal Hospital Authority. Mr. Bollaro seconded. Mr. Escher, Mr. Bollaro, Ms. Rodriguez, Mr. Lee and Dr. Kazmir voted yes, and Mr. Conroy and Ms. Kralik abstained. The motion carried.


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