SEBASTOPOL – Palm Drive Hospital announced Wednesday that it has successfully sold off $11 million in bonds, moving the once financially beleaguered hospital out of bankruptcy three years after it sought Chapter 9 protection from creditors.
The bonds will repay a bridge loan to Sonoma County, at approximately $3 million, and $2.2 million will go to bankruptcy creditors. Another $500,000 will repay a loan from the Sonoma Community Foundation
The hospital anticipates that roughly $3 million from the bond sales will be directed toward capital improvements, and any remaining money will go toward legal expenses associated with the bond sales.
“This should give everyone confidence that Palm Drive is making positive progress,” Neil Todhunter, the interim chief executive officer, said. “We can now move forward on solid footing, looking to the future instead of living under the cloud of bankruptcy.”
In 2007, the hospital was hampered with nearly $6 million in operating losses. By the end of the current fiscal year, the hospital expects an operating loss of $514,000, according to Mr. Todhunter.
Under the court-approved bankruptcy, Palm Drive will pay 55 cents on the dollar to creditors owed more than $10,000, and 75 cents on the dollar to creditors owed less than $10,000, the hospital said.
Palm Drive will also have the option of recalling the bonds and refinancing them if interest rates improve. The bond sale includes $4.3 million in 15-year bonds at 7 percent interest and $6.7 million in 25-year bonds at 7.5 percent interest. Debt service on the bonds will cost the hospital approximately $1 million a year, but officials at Palm Drive anticipate revenues of $30.3 million and expenditures of $30.2 million for fiscal 2011.