Hospital begs Clayton Commission to back bond

Clayton County’s only hospital could close if it doesn’t get $40 million to pay off creditors by the end of the year.

Leaders of Southern Regional Health System implored the county commission on Tuesday to back a $40 million bond. The money is needed to refinance existing hospital debt, hospital chief executive officer Edward Bonn said.

“If we don’t get this approval by the end of December, chances are bonds will be called and we will be in default,” chairman of the hospital board Ron Dodson told the commission. “We’re already in default. Our hospital will be closed down.”

The commission will vote next week.

SunTrust has agreed to re-issue bonds to the nonprofit hospital with the county’s financial backing as a bridge loan until the credit market stabilizes.

“I don’t beg very often, but at this time I’m begging you to consider this for the benefit of Clayton County,” Dodson said.

However, if the Riverdale hospital defaults on paying $2 million a year in interest, the county could be held responsible for the entire debt.

The county is in no position to inherit additional debt, Commission Chairman Eldrin Bell said.

“I’m not comfortable financially at this point to put the county’s backing behind anyone,” Bell said. “Our financial situation is not clear.”

Last month, auditors told the commission the county had spent $22 million of its reserves and had placed its bond rating in jeopardy because of spending. Auditors also said they could not trust financial information from the county. The state has also placed on a hold on all state grants because Clayton has not turned in required financial records.

Some commissioners said they were concerned about bailing out the hospital, particularly given that the hospital continues to lose money. In addition to the $40 million in debt, the hospital also lost another $40 million last year on indigent care, Bonn said.

“It’s hard to sell backing an institution that is having cash flow issues to the public,” Commissioner Wole Ralph said.

“It’s not the county’s responsibility to make sure the hospital is profitable. We would be backing something that SunTrust doesn’t want to back.”

Bonn promised the hospital would put $3 million to cover the annual interest payments in a separate account to assure the county does not inherit the debt. Bonn said the hospital is working to gain more “paying patients” with the recent addition of an enhanced joint program, a surgery robot and other services.

But much of that was paid for with taxpayers’ money, Ralph said. In the past 10 years, Clayton has given the hospital a total of $6 million to help expand services.

Commissioner Michael Edmondson said he doesn’t see why the hospital is not using its own money to pay off its debts. The hospital has $48 million in reserves — more than the county.

Using those reserves would put the hospital’s other bonds at risk, Bonn said.

Without the county’s help, the 376-bed hospital would be able to sustain for several months and maybe a year, Bonn said. It costs about $20 million a month to run the hospital.

“The end of December is critical,” Dodson said. “If we can just some way make it through this and get our financial feet on the ground, we would be stable.”