Tower Health is getting a cash boost from bondholders in major refinancing

Tower Health bondholders have agreed to a major refinancing that gives the Berks County nonprofit $142.5 million in additional cash for daily operations and eliminates a series of bond redemptions through 2029, Tower said Monday.

The first repayment for $64.6 million had been due in February. The agreement also postpones bond redemptions that were scheduled for February 2027 and February 2029, giving Tower additional time to work on recovering financially from a major expansion into the Philadelphia region three years before the COVID-19 pandemic.

“The overwhelming support from the vast majority of our bondholders for this agreement is a powerful endorsement of our financial recovery plan,” Tower said in a statement.

Tower Health reported a $27.4 million operating loss for the nine months that ended March 31, compared to a $122.8 million loss in the same period a year ago. However, the reduction in losses did not boost Tower’s cash reserves. That closely watched measure declined in the quarter, to the equivalent of 30 days of operating expenses on March 31 from 32 days at the end of the year.

The $142.5 million in proceeds from additional debt will nearly double Tower’s cash reserves, which stood at $153 million on March 31, according to Tower’s latest financial report to bondholders.

When Standard & Poor’s downgraded Tower’s credit rating last month to CCC, the credit agency cited concerns that Tower might not have the money for the February bond redemption.

Tower is anchored by Reading Hospital in West Reading. It got into financial trouble following a series of pricey acquisitions, including five struggling community hospitals, that took it into the highly competitive Philadelphia market. It has since closed or sold three of the five hospitals.

In addition to Reading Hospital, it still owns Phoenixville and Pottstown Hospitals, as well as 50% of St. Christopher’s Hospital for Children in Philadelphia.