Wed 04/26/2023 13:48 PM
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Relevant Documents:
Unaudited Quarterly Disclosure Ended Dec. 31, 2022
Audited Financial Statements and Supplement for Year Ended Dec. 31, 2022

ProMedica will pay down $452 million of privately placed debt in August using proceeds from the $710 million sale of its hospice and home health lines of business, according to financial statements for its quarter and year ended Dec. 31, 2022. ProMedica announced in February that it would sell its Heartland hospice and home care division to Gentiva. The sale is expected to close mid-2023.

ProMedica, a healthcare system with a portfolio of acute care, long-term and skilled care facilities, had $2.2 billion in total debt outstanding as of Dec. 31. The most recent institutional trade occurred on April 18 when its $219.6 million 5.25% Series 2018A revenue bond due 2048 traded at 88.9 to yield 6.1% on $1 million in volume, according to EMMA. The bonds had traded as low as 72 to yield 7.8% on $2 million in volume on Oct 18.

According to its financial disclosures, the company violated a debt to capitalization ratio covenant specific to privately placed debt issued through the following series of $452.8 million of direct loans outstanding as of Dec. 31:
  • $3.745 million Series 2015D;
  • $25.243 million Series 2015E;
  • $54.7 million Series 2017A;
  • $117.6 million Series 2017B;
  • $83.3 million Series 2017C;
  • $38.9 million Series 2017D;
  • $62.5 million Series 2017F; and
  • $66.9 million in aggregate of Series 2021A, Series 2021B and Series 2021C direct loans.

While ProMedica obtained a waiver from its lenders to the direct loans, the waiver will be rescinded in the event that the sale agreement is terminated or the sale price is changed, according to financial statements. If the sale closes as anticipated, the direct loans will be repaid in full by Aug 17. The bonds are classified as current liabilities as of Dec. 31.

ProMedica was compliant with its minimum 45 days cash on hand, or DCOH, covenant and minimum 1.1x debt service coverage ratio, or DSCR, covenant as of Dec. 31, reporting 87 DCOH as of Dec 31, down from 108.6 year over year, and a 1.48x DSCR as of Dec 31, down from 2.62x.

Financial results for the year ended Dec. 31 showed that revenue fell to $3.9 billion from $4.9 billion in 2021. The largest decline was premium revenue, which fell to $610 million from $1.98 billion after ProMedica’s subsidiary, Paramount Insurance Corp., was not awarded a Medicaid contract from the state of Ohio for the plan years 2022 to 2027.

The company suffered a $399.8 million operating loss in 2022, a swing from a $141 million operating gain for the year ended Dec. 31, 2021. ProMedica had a non-operating loss that deepened to $406.2 million from a $11.2 million loss year over year. This was driven by a $139.7 million investment loss in 2022, down from a $100 million gain in 2021.

Notably, pension losses were $139 million, a swing from a $13.6 million gain in 2021. ProMedica generated a deficiency of revenue over expenses of $843 million for the year ended Dec. 31, down from a $130.2 million surplus year over year.

Cash and cash equivalents fell to $408 million from $569 million while marketable securities fell to $99.6 million from $262.2 million year over year. Goodwill also declined to $782.4 million from $1.1 billion, all of which contributed to a contraction of assets to $5.2 billion from $9 billion, and a decline in total net assets to $973 million from $2.5 billion.
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