McLEANSBORO — Hamilton Memorial Hospital District's board of directors moved forward last week on a proposal to refinance its 2007 financing agreement for the hospital expansion and renovation.
First Midwest Bank, a Chicago-area financial institution, has made a proposal to refinance the hospital district's original loan.
Hamilton Memorial financed about $18.5 million in 2007 to renovate and expand its hospital and nursing home; the latter has since been sold.
The hospital district currently needs to refinance about $20 million, which would include an estimated $3 million on the original loan's interest-rate “swap,” Randy Dauby, Hamilton Memorial's chief executive officer, told the hospital board at its meeting July 30.
Hamilton Memorial's board voted 7-0 to approve a motion at that meeting to make application for the new loan — which calls for a $10,000 deposit from the hospital district — after accepting a term sheet from First Midwest.
A representative of First Midwest has already met with hospital officials and toured the facility, and the meeting went well, Dauby said.
Sovereign Bank, the principle lender on Hamilton Memorial's original loan, notified the hospital district in 2011 that it would not extend its letter of credit beyond the original five-year agreement, though it did grant a one-year extension last fall. That extension expires Nov. 1.
Since receiving Sovereign's notice, Hamilton Memorial has been looking at its options, which to this point are “not working out,” Steve Kennedy of Lancaster Pollard told the hospital board in a conference call at its recent meeting. Lancaster Pollard is the investment banking firm used by Hamilton Memorial in 2007 for the original loan.
But First Midwest is looking to move into the health-care market and work with critical access hospitals such as Hamilton Memorial, Kennedy said.
And First Midwest is “willing to work collaboratively” with Peoples National Bank, the local bank which currently holds about $3 million of the loan, he said.
First Midwest is offering both variable and fixed interest rates for terms of five to seven years, but the board has not yet decided on those terms. That decision can be made at the next board meeting, Dauby said.
One good thing about the First Midwest offer is that it does not require a commitment of the hospital district's tax base, hospital board member Mike Lewis said.
But he said he hopes if Hamilton Memorial does finalize a refinancing agreement with First Midwest, that any subsequent agreement could be for a longer term.
“The short-term costs are killing us,” Lewis said.