Prince George’s County recently paid $5 million to the financially struggling parent company of Prince George’s Hospital Center, as the health care system’s bondholders seek to protect their interests in case its recovery falters.
The county used proceeds of surplus land sold throughout the county to pay Dimensions Healthcare System, said John Erzen, a spokesman for County Executive Jack B. Johnson.
He said the funds were released earlier this month, reflecting the latest payment in a $45 million bailout package of the nonprofit health care system that state and county officials pledged in February 2004.
Dimensions, which also runs Laurel Regional Hospital and the Bowie Health Campus, lost more than $50 million between 1999 and 2004. Officials have hired a new chief executive officer and an outside management firm.
The company owes more than $70 million in outstanding bonds, financial records show.
Fitch Ratings, based in New York, last year assigned Dimensions bonds a B- rating and provided a negative outlook, citing “continued uncertainty over future grant support” and the company’s “ability to improve its overall financial profile.”
The trustee for Dimensions’ bondholders, Manufacturers and Traders Trust Co., has filed a financing statement with the Maryland Department of Assessments and Taxation.
The public document, called a uniform commercial code financing statement, puts creditors on notice that bondholders have a key securities interest in Dimensions.
Isaiah Baker, associate professor of law at Washington College of Law at American University, called the filing “a precautionary move” that would give bondholders a better chance of being repaid in case Dimensions’ finances worsen and result in bankruptcy.
“If you lose because you failed to file a paper, you lose big time,” he said. “This is a notice to the world that a particular creditor has a securities interest in the debtor.”
Dimensions spokeswoman Suzanne Almalel last week called the financing statement routine.
“There is no reason for concern,” she said., adding that bondholders had to update the filing because it was nearing expiration.
County officials don’t appear concerned.
Mr. Erzen said Dimensions has been making required payments to the bondholders on time.
“It is necessary to refile financial statements from time to time in order that they remain in effect,” said Frederick Stichnoth, an attorney for the bondholders’ trustee.
However, he said the filing was prompted in part by financial troubles at Dimensions, which recently disclosed that it had missed required pension plan contributions over several years.
“I can say the recent financial troubles impelled Dimensions and its lawyers to sort of review the situation of its creditors and the obligations that Dimensions has to them,” Mr. Stichnoth said. “To that extent, and to that extent only, this filing was provoked by these troubles.”
He said the filing was not “in contemplation of any bankruptcy.”
“So far as I know this was not contemplated; it was just a matter of bringing rights up to date.”