Care New England Health System Series 2016C Taxable Notes
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Supplement dated September 20, 2016 to Preliminary Offering Memorandum dated September 7, 2016 $20,291,000* Care New England Health System Series 2016C Taxable Notes This Supplement relates to the Preliminary Offering Memorandum dated September 7, 2016, as supplemented on September 15, 2016 (as so supplemented, the “Preliminary Offering Memorandum”) for the above-referenced notes. This Supplement should be read in conjunction with the Preliminary Offering Memorandum. Capitalized terms not otherwise defined herein have the meanings assigned in the Preliminary Offering Memorandum. Changes to the Master Indenture. The following additions are hereby inserted into the respective section numbers referenced below in “APPENDIX C – “FORM OF THE MASTER INDENTURE.” (1) Explicit Prohibition of Use of Disbursed Line of Credit Proceeds to Meet DCOH Requirement. The definition of “Unrestricted Cash and Investments” contained in the definition of “Days Cash on Hand” in Section 1.1 of the Master Trust Indenture is revised by adding the language shown in bold below: “Unrestricted Cash and Investments” means all cash and marketable securities that the Obligated Group could, in its discretion, apply to the payment of Debt without violating any Lien or other security agreement or applicable law or the restrictions of any grant or gift. Without limiting the generality of the foregoing, Unrestricted Cash and Investments shall not include: (A) trustee-held funds, including debt service funds, debt service reserve funds and construction funds; (B) malpractice funds, self-insurance or captive insurer funds; (C) pension or retirement funds; (D) funds subject to any Permitted Lien, unless such Permitted Lien secures all Obligations; (E) the undisbursed proceeds of any borrowing; and (F) moneys held by any Member of the Obligated Group that represent proceeds disbursed under any line of credit. Marketable securities shall be valued at fair market value as of the date of determination. Unrestricted Cash and Investments shall be reduced by the following: (i) bank overdrafts; (ii) the amount received from the sale or factoring of accounts receivable or inventory; and (iii) cash or investments held as part of litigation reserves or a reserve for any other liability. (2) Lockbox. Section 7.10 of the Master Trust Indenture is revised by dividing Section 7.10 into subsections (a) and (b) and adding the language in bold below: Section 7.10 Remedies Cumulative and Lockbox. (a) No remedy herein conferred upon or reserved to the Master Trustee or the holders of Notes entitled to the benefits hereof is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative, and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by * Preliminary, subject to change. 1 statute; and the employment of any remedy hereunder, or otherwise, shall not prevent the concurrent employment of any other appropriate remedy or remedies. (b) In the event of a payment default with respect to any Obligation or the failure of the Obligated Group to comply with Section 6.09 or Section 6.14 hereof which constitutes a continuing, unwaived and uncured Event of Default under this Master Indenture, the Master Trustee shall have the right to exercise all remedies of a secured party with respect to the Gross Receipts including requiring, by written notice to the Obligated Group Representative, that from that point forward all moneys, revenues and receipts of the Obligated Group that constitute Gross Receipts be placed upon receipt by the Obligated Group in a special account (the “Lockbox Account”) designated by the Master Trustee and subject to its control. Any withdrawals from such Lockbox Account shall require the written approval or consent of the Master Trustee. Such approval or consent may be subject to the direction, in accordance with the terms of this Master Indenture, by the holders of a majority in principal amount of Obligations then Outstanding hereunder. (3) Continuation of Mortgages and Debt Service Reserve Fund. A new subsection (g) is added to Section 12.1 of the Master Trust Indenture as follows: (g) No Replacement Master Indenture and no Replacement Obligations shall (i) relieve the Obligated Group from its requirement to continue to provide any mortgages granted to, any negative pledges in favor of, or any Gross Receipts pledged to, the Master Trustee unless, at the time such Replacement Master Indenture and Replacement Obligations become effective (or at any time thereafter), such Obligations shall be rated (based on the credit of the Obligated Group under the Replacement Master Indenture and the Replacement Obligations) at least AA- (or the equivalent thereof) by any Rating Agency then rating the Obligations; or (ii) result in the elimination of any Debt Service Reserve Fund previously created with respect to an Obligation. (4) Debt Service Coverage Ratio. Section 6.09(b) of the Master Trust Indenture is amended by changing September 30, 2019 to September 30, 2018. Changes to the Trust Indenture Regarding Continuing Disclosure. The following new sentence is added after the end of the final paragraph of Section 10.7 of APPENDIX D – “FORM OF THE TRUST INDENTURE”: The holder of any Note shall have the right to require CNE to hold any required investor call under the continuing disclosure agreement as provided in Section 7(e) thereof. Failure by CNE to schedule and hold such a call within ten (10) Business Days following receipt of a written notice from a holder of any Note shall constitute an Event of Default hereunder. 2 Additional Language Providing for Most Favored Nation Clause in the Note. The supplement to the Master Indenture authorizing the Series 2016C Obligation securing the Series 2016C Taxable Notes will contain language substantially similar to the following: During the period from the issuance of this Obligation No. 2 through September 30, 2018, the holder of this Obligation shall be entitled to the benefit of any financial covenant contained in any other Obligation issued under the Master Indenture (or document relating to any such other Obligation) which is in addition to, or more stringent than, the financial covenants contained in Section 6.09 and Section 6.14 of the Master Indenture. Any such covenant shall be incorporated herein by reference as if set forth herein and shall be effective until the earlier of: (i) September 30, 2018; or (ii) the prior expiration of such covenant or termination of the Obligation (or document related to the Obligation) in which it is contained. 3 Supplement dated September 15, 2016 to Preliminary Offering Memorandum dated September 7, 2016 $20,291,000* Care New England Health System Series 2016C Taxable Notes This Supplement relates to the Preliminary Offering Memorandum dated September 7, 2015 (the “Preliminary Offering Memorandum”) for the above-referenced notes. This Supplement should be read in conjunction with the Preliminary Offering Memorandum. Capitalized terms not otherwise defined herein have the meanings assigned in the Preliminary Offering Memorandum. Correction to Section Heading “SOURCE OF PAYMENT AND SECURITY - Mortgages Securing All Obligations Issued Under the Master Indenture.” The following paragraphs are hereby inserted at the end of the section entitled “SOURCE OF PAYMENT AND SECURITY - Mortgages Securing All Obligations Issued Under the Master Indenture.” The examination of title to both these facilities disclosed that the federal government had filed “Notices of Federal Interest” on certain portions of both campuses in connection with grants to the respective hospitals in 2003. The grant to Butler was for $240,000 and the grant to Kent was $295,070. The Notices of Federal Interest prevent the granting of mortgages without the consent of the Department of Health and Human Services (“DHHS”). The Obligated Group is in the process of working with DHHS to obtain consents and subordinations from DHHS to the mortgages to be granted. Accordingly, the Obligated Group will execute the Mortgages for the Butler and Kent campuses at the closing of the Series 2016C Taxable Notes and deliver the executed Mortgages to the Master Trustee in escrow. If the consent and subordinations are not received by December 30, 2016, the Obligated Group will repay the grants and discharge the liens. The Obligated Group received consents from DHHS for the mortgages filed in connection with the issuance by the Corporation of the Series 2013A Bonds and the Series 2014A Bonds following the closings for those bonds. * Preliminary, subject to change. PRELIMINARY OFFERING MEMORANDUM DATED SEPTEMBER 7, 2016 New Issue - Book-Entry only RATINGS: Fitch: BBB-, Outlook Negative S&P: BB, Outlook Stable (See “Ratings”) $20,291,000* CARE NEW ENGLAND HEALTH SYSTEM SERIES 2016C TAXABLE NOTES Issuer of the Notes The Series 2016C Taxable Notes are being issued by Care New England Health System, a Rhode Island not-for-profit corporation (“CNE”). Financing Documents The Series 2016C Taxable Notes will be issued pursuant to a Trust Indenture dated as of September 1, 2016 (the “Indenture”), between CNE and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). Use of Proceeds Proceeds of the Series 2016C Taxable Notes will be used to retire certain debt issued to fund capital projects at or refinance existing indebtedness related to The Memorial Hospital and The Providence Center (as defined herein). Proceeds of the Series 2016C Taxable Notes will also be used to pay certain incidental costs in connection with the issuance of the Series 2016C Taxable Notes, including costs of issuance. See “PLAN OF FINANCING.” Source of Payment and Security The Series 2016C Taxable Notes will be unconditional, full faith and credit obligations of CNE secured by a Series 2016C Obligation issued under the Master Indenture (as such terms are described and defined herein). See “Source of Payment and Security.” Pricing and Payment Terms See “PRICING AND PAYMENT TERMS” on the inside cover page.