Butler Health System seeking creditor’s OK for WVU merger
Butler Health System, an affiliate of Independence Health System, hopes to obtain the consent of bondholders and a lender by Dec. 12 to proceed with the merger between Independence and West Virginia University Medicine.
On Monday, days after IHS and WVU Medicine announced the merger, Butler Health System officials told creditors in a virtual meeting that Dec. 12 is the deadline to execute a letter of intent negotiated between the two health systems.
Tom Albanesi, Independence Health System chief financial officer, said consent from a majority of Series 2015 bondholders and Truist Bank is needed to sign the letter of interest. The process will take about two weeks to complete.
Bonds are typically held by tax-exempt mutual funds, but other financial institutions may also invest, Albanesi said.
The current principal of the 2015 bonds is $67.8 million and Truist Bank holds about $15 million in BHS debt.
BHS took on the debt in 2015 to fund a series of construction projects, including a new medical office building at Butler Memorial Hospital. The original loan from Truist Bank was $20 million.
In December of last year, the Butler County commissioners approved a forbearance agreement that allowed Butler Health System to resolve a default of the obligations of its bonds. BHS didn’t default on its bond payments, but didn’t have enough cash on hand to satisfy the financial covenants of the bonds for two years in what was called a “debt service coverage ratio default.”
The agreement calls for BHS to reissue public, tax-exempt revenue bonds originally issued by the Butler County Hospital Authority in 2009 and 2015 and provide additional mortgages to the bondholders and Truist as collateral.
The letter of intent calls for WVU Medicine to contribute “a minimum” of $600 million in strategic capital investments over a five-year period, including $80 million toward the installation of a new electronic health records system from Epic Systems.
A joint news release on Wednesday from Independence Health and WVU Medicine stated the latter would contribute $800 million.
IHS was formed three years ago by the merger of the BHS and Excela Health. The five hospital system includes Butler Memorial, Clarion, Frick, Latrobe and Westmoreland hospitals.
Butler Memorial and Westmoreland hospitals will serve as tertiary hubs in the WVU Medicine merger.
The West Virginia University Health System has 25 hospitals, including its flagship location of J.W. Ruby Memorial Hospital in Morgantown. The health system boasts more than 3,400 licensed beds, 4,600 providers, 35,000 employees and $7 billion in total operating revenues. The J.W. Ruby Memorial Hospital is an 880-bed academic medical center.
The system also includes the 150-bed WVU Medicine Golisano Children’s Hospital in Morgantown and five institutes — the WVU Cancer Institute, WVU Critical Care and Trauma Institute, WVU Eye Institute, WVU Heart and Vascular Institute and the WVU Rockefeller Neuroscience Institute.
A merger agreement between IHS and WVU Medicine is expected to be completed by the end of June. The agreement will then go to state and federal regulatory bodies for approval. The merger transaction is expected to close in early October.
