Tri-City Medical Center receives $71M senior loan from CapitalSource

CapitalSource, one of the leading commercial lenders in the United States, said today it is providing a $71 million senior loan to Tri-City Medical Center, a 397-bed, acute care hospital serving the North Coastal San Diego region of California.

“We appreciate the opportunity to help Tri-City ensure it maintains its status as a preferred hospital for care and treatment in Southern California”

The financing includes a $51 million secured term loan and a $20 million revolving line of credit. The hospital, owned by the Tri-City Healthcare District, is using the term loan to repay high-interest Auction Rate Securities (ARS) debt and ensures a consistent, predictable cost of debt. The accounts receivable-based line of credit is being used for working capital and planned capital expenditures, including the build-out of a medical office building for its physicians.

The hospital considered several options for refinancing the ARS before turning to CapitalSource. The traditional source of outside financing for public healthcare providers (including Hospital Districts) has been through the bond markets. While other commercial banks and lenders shied away from working with a public hospital, CapitalSource pursued the opportunity, engaging California counsel to do an exhaustive review of the California Code regarding lending to a government entity. CapitalSource was able to successfully meet the challenges of financing a public healthcare provider under California law.

“CapitalSource executed a creative, comprehensive solution to our financing needs,” said Larry Anderson, CEO of Tri-City Medical Center. “The structure of this transaction alleviates the instability in our cost of financing and gives us the liquidity to move forward with planned capital improvements and other initiatives.”

“We appreciate the opportunity to help Tri-City ensure it maintains its status as a preferred hospital for care and treatment in Southern California,” said Patrick Coffey, Managing Director, Healthcare Credit for CapitalSource. “This transaction is a great example of the type of relationship we value and we appreciate the opportunity to work with a fine management team led by Larry Anderson who is a seasoned CEO with extensive acute care hospital experience.”

CapitalSource has underwritten hundreds of healthcare transactions since its inception for all types of healthcare service providers (including acute care hospitals, skilled nursing facilities and rehab hospitals) real estate owners, and manufacturers and distributors of medical supplies and equipment. Its Healthcare Credit Group provides both cash flow and asset-based senior loans ranging from $5 million to $100 million.