The HUMC has refinanced last year's BAN (a form of Municipal Bond). It has a 7.8 yield and has fees to FSA insurance for credit support. The credit rating in this issue is one level above junk which my source finds to be "generous" at best. The prospectus is due to be released today. This issue is interest only for 17 years and then has balloon payments at the end of its 20 year term to pay off the principal which is about $9.7 million. This means that if you have a young child today, he/she will be paying off the principal just about the time they enter the workforce. The question is who authorized this financial gimmickry? Mayor Roberts? Judy Tripodi? The HUMC? Is this type of financing fair to future residents of Hoboken? For one I believe in a pay as you go philosophy so that the residents understand the costs of the services they are getting.
The new Hospital Bond via Bloomberg Terminal
Or does this type of financing mean that the administration knows the hospital is doomed anyway so why bother pay off the principal? I hope not, but the fact is the Hospital will survive only if it is managed very well and there is enough demand for its services. A business model must be tailored to the business climate and realities of its area of service, not put in place just to create jobs without an analysis of demand. A Hospital should be no exception to these practicalities.
Here is the redemption schedule showing the balloon payments at the end of the bond's term:
Here is the redemption schedule showing the balloon payments at the end of the bond's term:
Bloomberg screen showing balloon payments in 2027, 2028, 2029
Kudos to Scott Siegel for providing this information to the public via this website. Scott makes his living as a bond trader and often speaks on fiscal issues at City Council meetings.
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