UMass saves $25M in refinancing move

SAM BONACCI UMass Memorial President and CEO Dr. Eric Dickson with Worcester Mayor Joe Petty at a 2015 event.

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By Sam Bonacci

UMass Memorial Health Care issued bonds that will save the organization just shy of $25 million dollars in a refinancing move officials say could not have been carried out at a more perfect time.

“As in anything in life, timing is everything ... we hit a phenomenal figure,” said Sergio Melgar, chief financial officer for UMass Memorial. “We were on the market on the right day, with the right story and the right funds so we did extremely well.”

UMass Memorial issued its bonds to refinance approximately $140 million dollars of debt on Jan. 20 in the shadow of a volatile stock market.

However, it was not only the volatility in the market and investors looking for a more stable investment, said Melgar. The bonds happened to be offered on a day where investors had money to spend. The organization’s recent return to investment-grade status by organizations such as Fitch Ratings contributed to a large demands for the bonds. Speaking to this demand is when the bonds were issued, they were oversubscribed at a ratio of 7 to 1, Melgar said.

“We changed the level of confidence people have in the institutions, and that is what created the market. People now have confidence in us moving forward,” he said.

The savings that UMass Memorial officials initially estimated at a floor of $10 million actually came out to $24.671 million in today’s dollars. These savings will be realized over the next 30 years, Melgar said, as they come from the reduced interest the institution is now paying on its debt. The vast majority of the savings will actually be realized beyond 2020, he said.

“This is a benefit that will accrue to people that will make decisions that I won’t be around to make. I will be long retired when people are making decisions and seeing savings because of this transaction,” Melgar said.