CUSIP 689238AA1

  • ISIN: US689238AA10
  • Entity Name: Economic Development Corporation of the County of Ottawa
  • Sector: Municipal Agency
  • Announcement Date: *****
  • Effective Date: *****
  • Issue Date: *****
  • Maturity Date: *****
  • Country of Issuer: *****
  • Region: N.Amer
  • Issue Currency: *****
  • CA Type: Covenant Breach
  • News: NOTICE IS HEREBY GIVEN by UMB Bank, N.A., as Trustee, for the County of Ottawa Limited Obligation Revenue Bonds Series 2015, dated December 18, 2015 (the Bonds) providing this notice to update Holders and provide other financial information regarding such Bonds. The Bonds were issued by the Economic Development Corporation of the County of Ottawa (the Issuer) under the Bond Indenture dated December 1, 2015 between the Issuer and the Trustee, along with a Loan Agreement (the Loan Agreement) between the Issuer and the North Ottawa Community Hospital (the Hospital) (collectively, the Indenture and the Loan Agreement are the Bond Documents). Failure to Meet Financial Covenants The Trustee previously reported that it was in receipt of an officers certificate delivered to it by the Hospital with financial information from the Hospital reporting its failure to comply with the Coverage Ratio pursuant to the Loan Agreement. Pursuant to Section 11.19(a) of the Loan Agreement the Hospital was required to maintain a Debt Service Coverage Ratio of 1.20. If said ratio was less than 1.20 the Hospital was obligated to retain a Management Consultant, within 45 days to make recommendations to increase the said ratio for subsequent Fiscal Years to at least 1.20. The Hospital wasrequired to follow to the extent legally permitted and consistent with sound business practices, the recommendations of the Management Consultant. Pursuant to the certificate the Coverage Ratio of the Hospital as of June 30, 2016 was negative 11.9. Section 11.19(d) of the Loan Agreement provided that if the Coverage Ratio was less than 1.00:1 then it shall constitute an Event of Default under the Agreement. Pursuant to Section 702 of the Indenture an Event of Default under the Loan Agreement constitutes an Event of Default under the Indenture. Thus, an Event of Default has occurred under the Bond Documents. The Debt Service Coverage Ratio was out of compliance for the fiscal year ending June 30, 2017. The Hospital has stated that it was out of compliance as of June 30, 2018. 2 WA 10396710.2 On August 17, 2017, the Trustee was informed that a company called Kaufman, Hall & Associates, LLC (Kaufman Hall) was employed to serve as the Management Consultant. On October 24, 2017, the Trustee received a Report of Findings from Kaufman Hall. The Trustee provided the report to any registered Holder or its certified representative who requested the report. Notwithstanding a continuing Event of Default under the Bond Documents, the Hospital is current on payments under the Bond Documents. Trustee Consultant Report The Trustee sought a second consultants report to advise it of the Hospitals operations to date. RHG advised as a part of its Executive Summary as follows: Financial Highlights Due to operating losses and the related negative cash flow, the Hospital is not in compliance with payment requirements and covenants of the bond indenture. The Hospital has incurred losses and currently has a deficiency in its net position1 due to recurring negative cash flows and other balance sheet items of $11,628,000. In 2018, the Hospital reported an operating loss of $7,802,000 and a negative EBITDA of $3,011.000. Such consultant pursuant to the Bond Documents is to be paid for by the Hospital. The Trustee through its counsel hired Rural Hospital Group (RHG) to advise it. RHG through its review of information requested from the Hospital has provided the Trustee and its counsel with a report providing recommendations for the Hospital to take and concluded, in part, that Given the Hospitals poor financial performance over the recent years and given further that the competition in the area is intensifying, changes need to be made, and made quickly if the Hospital is to survive. Urgency in making the changes is imperative. If the changes are made timely the hospital will be in a position to continue offering services to its community -- if not the hospitals survivability is very much in question. The Trustee will provide the report to any registered Holder or its certified representative upon written request. The Trustee recommends that Holders read the entire report. Collateral for the Bonds The Trustee has in prior notices provided information on the collateral for the Bonds. This information and a supplement thereto is set forth below: There is a property referred to as the Grand Haven Propertywhich consists of three (3) contiguous parcels totaling approximately 50 acres of land. There are currently two small houses located on this property. The Grand Haven Property was purchased by the Hospital for a total of $1,575,000 on August 31, 2010. As of 2015, the local taxing units valued the Grand 1 Net position is the difference between the Hospitals assets, liabilities and deferred inflows and outflows of resources reported on its balance sheet. 3 WA 10396710.2 Haven Property for purposes of assessing real property
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