LMH Health board approves plan to issue $20 million in bonds to accelerate construction of facilities

photo by: Contributed

LMH Health's main campus at 325 Maine St.

The LMH Health Board of Trustees voted Wednesday morning to approve the issuance of $20 million in bonds to accelerate the hospital’s long-term facilities goals.

The board voted unanimously to move forward on the financing plan that would help the hospital fund key revenue-generating projects like the cardiac catheterization laboratory, the completion of the cancer center and the heart center.

Rob Chestnut, LMH’s chief financial officer, told the board these upgrades were not going to be able to be funded solely through internal cash flow, which raised the idea of using the debt funding.

Chestnut said the bonding process is similar to when the hospital raised $55 million in bonds in 2018 to help fund the $93 million LMH Health West Campus at 6265 Rock Chalk Drive, as the Journal-World reported. That project opened in the fall of 2020.

The hospital would not have been able to explore the debt funding the last couple of years because of LMH’s financial performance, Chestnut said, but as the hospital’s operating margin got better, the hospital’s bond ratings from Moody’s have increased to BBB and are trending toward A ratings in several categories, which would allow the debt financing now.

Because the hospital used around $40 million in cash along with the debt funding for the West Campus project, Chestnut said, LMH’s finances will still be in good shape, with the debt to equity ratio remaining “fairly conservative” compared with other hospitals.

“If you compare us to hospitals our size, we would be considered under-leveraged, which is why we thought this was the right opportunity to do it,” Chestnut said.

Chestnut also told the board that the hospital is looking to negotiate the bonds so that they will end at the same time as those that were issued in 2018.

The bond issuance will first need to be approved by the Lawrence City Commission, likely in April. Rebecca Smith, the vice president of strategic communications for LMH and the LMH Health Foundation’s executive director, said that although the debt plan would go in front of the city government, it would not cause any debt liability for residents.

If the City Commission approves the $20 million in bonds, they would be issued April 30, Chestnut said.