Valley Health $62.22M bond sale

Posted: August 16, 2014

The Winchester Star

WINCHESTER — Valley Health announced the sale of about $62.22 million in municipal bonds this week that will help the system save hundreds of thousands of dollars a year.

Most of the bonds — about $44 million — were issued by the Winchester Economic Development Authority, with the remainder coming from the West Virginia Hospital Finance Authority.

Sale proceeds will go toward the outstanding $134.78 million Valley Health owes on $200 million in bonds it sold in 2009, Senior Vice President and Chief Financial Officer Peter Gallagher said via email Friday.

The 2009 sale went to help pay for expansion of Winchester Medical Center, including a five-story tower; construction of a hospital in Hampshire County, W.Va.; and the replacement of a hospital near Berkeley Springs, W.Va.

Half of those bonds had a 6-percent interest rate, and the other had a variable rate that was at 4.5 percent at the time of sale.

The bonds issued Thursday had an interest rate of about 4.2 percent, according to Gallagher.

The sale was through a Wells Fargo Securities-led underwriter group, said John Cheney, managing director of Ponder & Co., a financial services firm serving the health care industry. The minimum purchase was for $5,000.

“They were all sold,” he said Friday. “There were more orders for many of the bonds than there were bonds to go around. Valley Health was very pleased with the interest rate and the refunding savings.”

Cheney likened the process to refinancing a mortgage, and said Valley Health would save at least $300,000 a year as a result.

“People are buying tax-exempt hospital revenue bonds,” he said of the bond sale. “Their interest payments are exempt from federal income tax and state income tax in Virginia if they’re issued by a Virginia municipality.

“Valley Health and the authority agree that the authority will loan the money to Valley Health, and Valley Health pays it back to the authority, and the authority basically remits the payment to bond holders. The bonds will be repaid by revenues of Valley Health hospitals.”

— Contact Sally Voth at