Presentation is loading. Please wait.

Presentation is loading. Please wait.

Presentation to by Nemzoff & Company, LLC Jefferson Parish Council.

Similar presentations


Presentation on theme: "Presentation to by Nemzoff & Company, LLC Jefferson Parish Council."— Presentation transcript:

1 Presentation to by Nemzoff & Company, LLC Jefferson Parish Council

2 Presentation Outline  Hospital Profiles  Bidder Profiles  Credit Comparison  Summary of Bids  Credit Analysis  Proposed Selection Criteria  Next Steps  Questions and Answers 2

3 Hospital Profiles 3 East Jefferson Operating Revenue$360$366$367 EBDIT$37$28$18 EBDIT Margin10%8%5% Cash$160$133$129 Debt$172$166$161 RatingNA Ba1 Dollars in Millions

4 Hospital Profiles 4 West Jefferson Operating Revenue$251$254$269 EBDIT$26 $27 EBDIT Margin10% Cash$100$102$99 Debt$145$143$144 RatingNA BBB Dollars in Millions

5 Hospital Profiles 5 East & West Jefferson - Combined Operating Revenue$611$620$636 EBDIT$63$54$45 EBDIT Margin10%9%7% Cash$259$235$229 Debt$317$309$305 RatingNA Dollars in Millions

6 Hospital Profiles Transaction Cash Shortfall 6 Current as of 12/31/13 Bonds Assumed Bonds Paid off Operating Revenue $636 Cash $229$0 EBDIT $45 Principal ($8.4) $0 Interest ($17.6) $0 Cash Flow before Capital Requirements $19 $45 Capital Commitment ($37)($45) Annual Cash Flow Surplus (Deficit) ($18)($26)$0 Dollars in Millions

7 Bidder Profile 7 Children’s Hospital Operating Revenue$223$252$407NA EBDIT$18$45$195*NA EBDIT Margin8%18%48%NA Cash$665$708NA Debt$0 NA RatingNA AANA Dollars in Millions *Medicaid Supplemental Payment - $204MM

8 Bidder Profile 8 Touro Infirmary Operating Revenue$249$306$349NA EBDIT$20$33$96*NA EBDIT Margin8%11%29%NA Cash$40$85NA Debt$75$73NA RatingNA BBBNA Dollars in Millions *Medicaid Supplemental Payment - $80MM

9 Bidder Profile 9 Interim LSU Hospital – 6 month data Operating RevenueNA $176NA EBDITNA ($31)NA EBDIT MarginNA (18%)NA CashNA DebtNA RatingNA Dollars in Millions

10 Bidder Profile 10 LCMC - Combined Operating Revenue$464$524$932$940 EBDIT$38$78 1 $261 2 $26 EBDIT Margin8%15%28%3% Cash$705$793$1,135$1,061 Debt$75$73$343$322 RatingNA Dollars in Millions 2 Medicaid Supplemental Payment - $284MM 1 Medicaid UPL $66MM

11 11 Bidder Profile LCMC - Accounting 101 Example 1 1.Community hospital is making $5MM in profits this year and the last day of the year, they borrow $10MM and they do not spend it. 2.On their year end financials, They show a $5MM profit on their Income Statement. 3.Their debt which is a liability goes up by $10MM and their cash goes up $10MM. That is why they call it a Balance Sheet, because anything that happens on the liability side impacts the assets side dollar for dollar.

12 12 Bidder Profile LCMC - Accounting 101 Example 2 1.Community hospital is making $5MM in profits this year and on the last day of the year they buy an MRI for $4MM. 2.On their year-end financials, they show a $5MM profit, because capital expenditures are not an expense that appears on their Income Statement. 3.On their Balance Sheet, their cash goes down by $4MM and their property plant and equipment goes up by $4MM. Their total assets do not change.

13 13 Bidder Profile LCMC - Accounting 101 What happened at LCMC in 2013? 1.They borrowed $250MM. So their debt went up by $250MM and their cash went up $250MM. 2.In addition to that, they wrote the state a check for $258MM in order to prepay the lease on the University transaction. They put that expense on their Balance Sheet and they called it "other assets“. 3.The state of Louisiana increased their Supplemental Medicaid payments by $260MM, virtually the same number. They put that on their Income Statement as revenue.

14 14 Bidder Profile LCMC - Accounting 101 What happened at LCMC in 2013? 4.The revenue went on their income statement, the expense went on their balance sheet and the money is gone. But if you only look at their income statement, it looks like they made a fortune. 5.Their forecast for EBDIT in 2014 is 3%. 6.That means they have $27MM in cash flow before they pay the debt service on $340MM bonds and before they pay for any capital.

15 Bidder Profile 15 Ochsner Health System (9 mo. data) Operating Revenue$1,796$1,842$1,475 EBDIT$115$72$102 EBDIT Margin6%4%7% Cash$437$367$364 Debt$666$656$634 Pension Liability$144$155$151 RatingNA BBB+ Dollars in Millions

16 Bidder Profile 16 HCA Operating Revenue$29,682$33,013$34,182 EBDIT$7,063$6,371$6,547 EBDIT Margin24%19% Cash$373$705$414 Debt$26,000$27,000$28,000 RatingNA Ba3 Dollars in Millions

17 Credit Comparison Total Revenue $2B *Source: Standard and Poor’s 2012 Median * * * 17

18 Credit Comparison EBDIT Margin 2013 LCMC entities adjusted for Medicaid Pass-through Source: Standard and Poor’s 2012 Median 2 -18% 18

19 Credit Comparison Days Cash on Hand 2013 NA NA NA *Source: Standard and Poor’s 2012 Median * * * * 19

20 Summary of Bids What is Transaction Value?  Cash Delivered at Closing  Property Taxes Paid  Debt Assumed  Pension Obligations Assumed  Other Liabilities Assumed Equals Transaction Value at Closing Plus Capital Equals Total Transaction Value 20

21 Summary of Bids Transaction Value – East Jefferson Ochsner Health System Bonds Assumed Bonds Paid Off Cash Delivered at Closing$0$167 Assumption of Debt$167$0 Debt Service Reserve Fund$0 Trustee Held Fund$0 SUBTOTAL$167 Assumption of Pension$33 Assumption of Other Liabilities$8 Transaction Value at Closing $208$208 Plus PV of Capital over 15 yrs. $208$208 Total Transaction Value $416$ Dollars in Millions

22 Summary of Bids Net Proceeds – East Jefferson Ochsner Health System Bonds Assumed Bonds Paid Off Cash at Closing$0$167 Cash on Hand$186 Debt Service Reserve Fund$0$12 Debt Paid Off$0($205) Net Proceeds Net Proceeds$186$ Dollars in Millions

23 Summary of Bids Transaction Value - Both Hospitals LCMC Bonds Assumed Bonds Paid Off Cash Delivered at Closing$223$449 Assumption of Debt$305$0 Debt Service Reserve Fund($23)$0 Trustee Held Funds($87)$0 Transaction Value at Closing $418$449 Plus PV of Capital over 15 yrs. $490$490 Total Transaction Value $908$ Dollars in Millions

24 Summary of Bids Net Proceeds - Both Hospitals LCMC Bonds Assumed Bonds Paid Off Cash at Closing$223$449 Cash on Hand$229 Other Liabilities($10) Pension($66) Debt$0$305 Trustee Held Funds$0$110 Defeasance Premium$0$76 Net Proceeds Net Proceeds$376$ Dollars in Millions

25 Summary of Bids Transaction Value - West Jefferson LCMC Bonds Assumed Bonds Paid Off Cash Delivered at Closing$66$225 Assumption of Debt$147$0 Trustee Held Funds($38)$0 Other Liabilities$4$0 Pension$33$0 Transaction Value at Closing $212$225 Plus PV of Capital over 15 yrs. $233$233 Total Transaction Value $445$ Dollars in Millions

26 Summary of Bids Net Proceeds - West Jefferson LCMC Bonds Assumed Bonds Paid Off Cash at Closing$66$225 Cash on Hand$99 Other Liabilities$0($3) Pension$0($34) Trustee Held Funds$0$38 Debt$0($147) Defeasance Premium$0($25) Net Proceeds Net Proceeds$165$ Dollars in Millions

27 Summary of Bids Transaction Value - Both Hospitals HCABonds Paid Off Prepaid Lease Payment$575 Community Fund$2 Defeasance Fund$83 Net Working Capital Surplus$13 Cash Delivered at Closing$673 Present Value of Property Taxes$194 Transaction Value at Closing $867 Plus PV of Capital over 15 yrs. $490 Total Transaction Value $1, Dollars in Millions

28 Summary of Bids Net Proceeds - Both Hospitals HCABonds Paid Off Cash at Closing$673 Cash on Hand$229 Bond Defeasance($381) Trustee Held Funds$110 Pension($66) Other Liabilities($10) Net Cash at Closing$555 PV of Property Taxes$194 Net Proceeds on a PV Basis $ Dollars in Millions

29 Summary of Bids Transaction Value - Individual Hospitals HCABonds Paid Off EastWest Cash Delivered at Closing$336.5 PV of Property Taxes$97 Transaction Value at Closing $433.5$433.5 Plus PV of Capital over 15 yrs. $245$245 Total Transaction Value $678.5$ Dollars in Millions

30 Summary of Bids Net Proceeds - Individual Hospitals HCABonds Paid Off EastWest Cash at Closing$336.5 Cash on Hand$130$99 Bond Defeasance($209)($172) Trustee Held Funds$72$38 Pension($32)($34) Other Liabilities($7)($3) Net Cash at Closing$290.5$264.5 PV of Property 5%$97 Net Proceeds on a PV Basis $387.5$ Dollars in Millions

31 Summary of Bids Transaction Value/Net Proceeds Reconciliation – Both Hospitals Bonds Paid Off Bonds Assumed HCALCMC Transaction Value at Closing$867$449$418 Plus Cash$229 Less Debt Paid($381) $0 Debt Assumed$0 ($305) Trustee Held Funds$110 Pension($66) Other Liabilities($10) Net Proceeds$749$331$ Dollars in Millions

32 Summary of Bids Transaction Value/Net Proceeds Reconciliation – Individual Hospitals Bonds Paid OffBonds Assumed HCA (East) HCA (West) LCMC (West) Ochsner (East) LCMC (West) Ochsner (East) Transaction Value at Closing$433.5 $225$208$212$208 Plus Cash$130$99 $128$99$128 Less Debt Paid($209)($172) ($204)$0 Debt Assumed$0 ($147)($167) Trustee Held Funds$72$38 $70$38$58 Pension($33)($32)($33)($34)($33) Other Liabilities($7)($3)($4)($8)($4)($8) Net Proceeds $387.5$361.5$153$160$165$ Dollars in Millions

33 Summary of Bids Capital Commitment Comparison of Bids Capital CommitmentHCALCMCOchsner First 10 years$450 Years 11 to 15Unknown$225 Years 16 to 30Unknown $ Dollars in Millions

34 Ochsner Credit Analysis Ochsner 2013 Net Revenue$2,000 (estimated) EBDIT Margin 20124% EBDIT Margin 20137% (based on 9 mos. Actual) Long Term Debt LTD as a % of Revenue $634 32% Unfunded Pension Liability$151 Unfunded Pension as a % of Revenue8% Cash on Hand Before Transaction $ Dollars in Millions

35 Ochsner Credit Analysis Lease for East Jefferson Ochsner Transaction Value$208 Present Value of Capital for 15 yrs.$208 Present Value of Transaction Cost, First 15 yrs. Only Present Value of Transaction Cost, First 15 yrs. Only$ Dollars in Millions

36 Ochsner Credit Analysis Lease for East Jefferson OchsnerCashExpenses Days Cash on Hand Ochsner as of 12/31/13$364$1, days Ochsner plus East Jefferson as of 12/31/13$364$2, days Post Transaction East – Bonds Paid Off 2 $156$2, days 36 Dollars in Millions 1 Prorated based on 9 mos. data 2 Assumes payment of $208MM at closing

37 LCMC Credit Analysis LCMC 2013 Net Revenue$940 Adjusted EBDIT Margin 20130% Projected EBDIT Margin 20143% Long Term Debt as a % of Revenue37% Cash on Hand Before Transaction $1.1Billion 37 Dollars in Millions

38 LCMC Credit Analysis Lease for Both Hospitals LCMC Bonds Assumed Bonds Paid Off Transaction Value$418$449 Present Value of Capital for 15 yrs.$490 Present Value of Transaction Cost, First Present Value of Transaction Cost, First 15 yrs. Only $908$ Dollars in Millions

39 LCMC Credit Analysis Lease for West Jefferson LCMC Bonds Assumed Bonds Paid Off Transaction Value$212$225 Present Value of Capital for 15 yrs.$232 PV of Transaction Cost, First 15 yrs. Only PV of Transaction Cost, First 15 yrs. Only$448$ Dollars in Millions

40 LCMC Credit Analysis Lease for Both Hospitals LCMCCashExpenses Days Cash on Hand LCMC as of 12/31/13$1,135$ days LCMC plus East & West Jefferson as of 12/31/13$1,135$1, days Post Transaction East & West Jefferson – Bonds Paid Off*$686$1, days 40 Dollars in Millions *Assumes payment of $449MM at closing.

41 LCMC Credit Analysis Additional Consideration 41  Performance based payments assuming an increase in EBDIT above 8%. Value assigned by LCMC - $129MM.  Economic Impact of moving back-office functions. Value assigned by LCMC - $24.5MM per year.

42 LCMC Credit Analysis Additional Consideration 42  Lease term 30 years plus three 15-year renewal – total term 75 years.  At the end of the lease any improvements made to the existing building revert back to the District. Anything they build off campus, LCMC keeps. Any major moveable equipment they purchase, LCMC keeps.

43 Proposed Selection Criteria The #1 Criteria for Selecting a Winning Bid is, “What is best for the people of Jefferson Parish?” 43

44 Proposed Selection Criteria The #2 Criteria for Selecting a Winning Bid is, “Who can we entrust our hospital to for the next 45 to 75 years?” 44

45 Proposed Selection Criteria Report Card 45 HCALCMCOchsner Loss of ControlFFF Current Credit StrengthABC Management Expertise - FinanceACC Management Expertise - QualityBBA GuarantyABC

46 Proposed Selection Criteria Report Card 46 HCALCMCOchsner Transaction ValueACC Anti-trust RiskADD Mission CompatibilityCBB For-Profit vs Not-for-ProfitNA GPA

47 Proposed Selection Criteria What is credit strength? 47 HCALCMCOchsner Can they afford this? Both HospitalsYesNoNA One HospitalYesMaybe What is their current credit strength? StrongAverageMarginal What is their future credit strength, if they do this deal? Both HospitalsStrongWeakNA One HospitalStrongMarginal

48 Next Steps  Select Winning Bidder  Retain Transaction Team  Due Diligence  Definitive Agreement  Closing 48

49 Next Steps  Both hospitals, management team, attorneys, financial advisors & board members all have a conflict of interest with respect to negotiating the transaction.  Management team members would negotiating with their future employers. 49

50 Next Steps  Advisors and lawyers would be negotiating with their future clients.  The Board Members are currently the Board of Trustees of the Lessor. The day after closing, they will be the Board of Trustees of the Lessee, unless they all resign. 50

51 Questions and Answers 51


Download ppt "Presentation to by Nemzoff & Company, LLC Jefferson Parish Council."

Similar presentations


Ads by Google