D-H Obligated Group Case Study

A special meeting of the Committee was called to further discuss the New London Hospital Association, Inc. (NLHA) membership in the D-H Obligated Group. Members of the Committee discussed concerns related to due diligence for NLHA, funding of pension obligations and offsetting controls within the structure of the group.

Dartmouth Hitchcock completes an extensive review of potential Affiliate’s considered for membership into the D-H Obligated Group. This includes outstanding debt of the Organization including balances, rates, call provisions, swap agreements and any termination provisions. Once D-H Management has completed their due diligence and determined that an Affiliate would be a suitable candidate for membership, the D-H Board must vote to allow extension of membership to that Affiliate and the Affiliate Board must also agree to membership.

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D-H currently has a lower ratio than that of NLHA; inclusion to the group should allow NLHA to enjoy the same ratio as D-H.

2) Current D-H debt agreements only extend to their receivables, whereas the current debt agreements between NLH and Citizens Bank include receivables and a mortgage on the property of the Organization. Joining the D-H Obligated Group will provide greater borrowing power for all within the group. Current agreements will be revisited after NLHA becomes a member of the group to explore the possibility of extending similar collateral requirements to NLHA.
3) NLHA should expect to receive a lower overall interest rate after joining the D-H Obligated Group. Per Mr. Waters, NLHA should expect to see annual savings in the vicinity of $100k.

4) Membership in the D-H Obligated Group should not have an effect on the current swap agreement. In the future savings could potentially occur from making changes to the swap, but at the current time costs exceed potential