Bond insurer urges NRMC board to accept its recommendation

On Monday, the Nevada Regional Medical Center Board of Directors received a letter encouraging the board to reconsider accepting Build America Mutual Assurance Company's (BAM) recommended chief restructuring officer.

The CRO selected by BAM would help the hospital resolve its financial troubles, which includes a declaration of default for the revenue bonds issued by the city for the hospital.

The letter also addresses consequences the hospital may face if the board does not reconsider its decision.

BAM, the insurer for the bond issued by the city of Nevada for NRMC, states BAM "continues to welcome and encourage ongoing discussions about potential terms of forbearance and withholding of the exercise of remedies with respect to the defaults specified in the default declaration. BAM, as the insurer of the bonds, is the party entitled to direct the trustee (UMB Bank, N.A.) to exercise any and all available remedies or to forbear from exercising remedies."

According to the letter from Michael Weinstein, BAM chief surveillance officer, the NRMC board is not interested in considering BAM's recommended restructuring officer and the board chairman "is no longer willing to engage in direct communications with BAM and future communications regarding the hospital should be conducted through the board's new outside counsel."

On Tuesday, NRMC Board Chair Bob Beaver told the Daily Mail he is not saying he won't speak to Weinstein, but for information regarding the hospital, Weinstein will have to speak to a recently retained attorney, Daniel Doyle of Lashly & Baer, P.C. of St. Louis.

Weinstein also states in his letter BAM "will seek judicial appointment of a receiver if the hospital will not agree to the consensual engagement of a qualified chief restructuring officer/consultant with proper delegated powers to position the hospital for sustainable operations." Weinstein also states the CRO candidate "is prepared to start immediately. In fact, this individual has developed a plan, based on NRMC's public financial disclosure, to realize immediate improvement in several areas that he was ready to present to the NRMC Board on Jan. 23."

Beaver said the board has not dismissed the idea of adding a chief restructuring officer.

"There's a whole bunch out there," Beaver said of potential CROs. "They (bond insurers, bond attorneys and others) all have their favorites. If we're hiring an attorney, we should at leas talk to him and see which restructuring person he has worked with, if he has someone he would recommend. It seems logical."

Beaver said a special meeting may be held in the near future to meet with a potential CRO. He said the date and time of the meeting will depend on the individual's availability. Beaver said there is a chance the meeting will be closed as a CRO could become an NRMC employee. Revised Statutes of Missouri allows for closed meetings to discuss the hiring of employees.

Weinstein states "this reversal by the hospital board has compelled BAM to direct the trustee to send the default declaration and to consider remedies available to it," but BAM is willing to continue discussing "terms that are mutually agreeable to BAM and NRMC" and is willing to advance funds to pay the first few month's salary of the CRO.

Weinstein also discusse

ds NRMC's low daily cash balance, which are in the black because NRMC has not been paying its creditors on a timely basis. Accounts payable are operating on 109.1 days instead of 60, according to Weinstein.

He also states NRMC has received managerial assistance from two outside consulting firms and has made changes on some recommendations, but those have not been enough. Weinstein said the board "has been unwilling to consider certain recommendations, such as RHG's proposal to replace the current facility with a smaller, better designed hospital, financed through a low-cost USDA loan program, that would be aligned with the community's needs and wold allow NRMC to operate on a sustainable long-term basis. By dismissing such recommendations without property analysis or due diligence, the board has demonstrated that is (sic) does not have the willingness to take the steps necessary to ensure the long-term viability of NRMC."

Weinstein also states a CRO is "the most productive and effective approach to resolve NRMC's financial circumstances."

Closing the hospital "would have a devastating impact on the Nevada community," Weinstein stated.

He also said filing for bankruptcy is also not a good option as that would also impact the city, as owner, issued the bonds for NRMC.

Bankruptcy, according to Weinstein, "would invariably land the city itself in bankruptcy also, and lead to a downgrade of the city's financial rating and its ability to finance its own capital improvements and needs. In addition, such filing would spark a vigorous legal challenge by the BAM and other NRMC and city creditors – ultimately consuming public resources that are better directed to improving NRMC's operations."

Nevada City Manager Mark Mitchell, who received a copy of the BAM letter, told the Daily Mail the city is consulting with City Attorney William McCaffree and William Burns, esquire, Gilmore & Bell, PC, bond counsel for the city, to confirm Weinstein's statement. Mitchell said he intends to present that information to the city council on Feb. 6 and also, if possible, make that information public.

Beaver said he could not confirm or deny the board has discussed the possibility of filing for bankruptcy. He said that would be a closed session discussion, which is not to be made public.

According to a biography for Doyle on the Lashly & Baer website, Doyle "has significant experience in both bankruptcy and transportation cases, having represented transportation companies both as creditors and as debtors in large Chapter 11 cases. Most recently, Mr. Doyle filed a Chapter 9 bankruptcy case for a critical access rural hospital that culminated in confirmation of a plan supported by a number of governmental creditors, preserving desperately needed health care to an underserved region. Both Chapter 9 municipal filings and successful hospital reorganizations are rare."

Weinstein's letter also states "certain of the defaults enumerated in the Default Declaration cannot be cured." The letter does not state what those are, but those "give rise to BAM's right to direct the trustee to pursue available remedies. Those remedies range from all gross hospital revenues being placed in a lock box controlled by the trustee or its designee; appointment of a receiver; entry into, use, occupation and control of the mortgaged property; foreclosure of the lien and sale of all real property; acceleration of the bond maturity date; and "all other legally available rights and remedies."

The letter concludes with Weinstein stating he believes the hospital leaders need assistance in resolving the financial problem and he hopes the board will "continue to engage with BAM on ways we can work collaboratively to ensure the hospital's long-term success."

The Daily Mail's attempt to obtain more information from BAM was unsuccessful by press time.

"The hospital will not close," Mitchell told the Daily Mail, adding while he remains as the city manager, he is doing everything possible to make sure the issue is resolved.

Mitchell said it is also in BAM's best interest to ensure the hospital continues to operate. He said like any other insurance company that doesn't like to pay a claim, BAM is doing everything possible to avoid having to pay off the bond.