NJHCFFA Issues its First Round of Bank Qualified Bonds on
Behalf of Shore Memorial Hospital

(Trenton)  On September 16th, the New Jersey Health Care Facilities Financing Authority (the "Authority") successfully issued its first series of bank qualified bonds on behalf of Shore Memorial Hospital.  Issued in an amount of $30 million, the bonds fall within the new parameters for bank qualification created by the Federal Stimulus in the American Reinvestment Act of 2009.  These parameters helped the hospital receive more favorable interest rates from the bank.  This was the first issuance of bank qualified bonds in the Authority's 37-year history.

Bank qualified bonds are tax-exempt bonds for which a financial institution, in this case TD Bank, can deduct the carrying costs associated with the bonds, (i.e. the interest expense incurred to purchase or carry an inventory of securities).  Previously, bank qualification could only be met by issuers that did not anticipate issuing more than $10 million in a year, and "issuer" was interpreted to include conduit authorities.  Because the Authority has always issued more than $10 million in a year, none of its bonds could be bank qualified.  The Federal Stimulus package redefined "issuer" as the entity using the bond proceeds, in this case Shore Memorial, and raised the limit from $10 million to $30 million. Therefore, TD Bank can deduct the carrying costs associated with purchasing these bonds.

The proceeds of the bonds will be used to finance costs associated with the construction and equipping of a new surgical pavilion.  Shore Memorial actually plans to fund $45 million of this project with Authority bonds, however, due to the $30 million per calendar year limit for bank qualification, Shore Memorial will be issuing the remaining $15 million in the first quarter of 2010.  Structured as a variable rate transaction, the bonds bear interest at an index rate initially set at 2.58%.

"We are pleased to be able to work with the new parameters of bank qualification in order to provide an advantageous transaction for Shore Memorial," said Mark Hopkins, Executive Director of the Authority. "The bond market was changed by the economic downturn, and the federal government took remedial action to help that market.  It is important to for us to work with those changes so that our borrowers and bondholders can get the benefits that the government intended for them."

Shore Memorial Hospital, located in Somers Point, New Jersey, is a not-for-profit, 296 licensed-bed facility with 1,600 employees and more than 350 physicians.  It is accredited by the Joint Commission, which has also certified the hospital with a Gold Seal of Approval^TM as a Primary Stroke Center.  Shore has also received a Gold Seal of Approval^TM for healthcare quality by the Joint Commission for Lumbar and Cervical Spine Surgery programs.  In addition to centers of excellence in Cancer, Cardiovascular, Neurological, Orthopedic, Emergency and Maternity and Pediatric health care, it has a long-standing affiliation with both the University of Pennsylvania Health System and The Children's Hospital of Philadelphia.

Created in 1972 by an act of the Legislature to provide not-for-profit health care providers with access to low-cost capital, the Authority is the primary issuer of municipal bonds for New Jersey's health care organizations. Since inception, the Authority has issued over $16 billion in bonds on behalf of over 150 health care organizations throughout the state.

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