Texas' Baylor College of Medicine in default of revenue bond covenants

By Caroline Salls

Pittsburgh, Aug. 13 - The Baylor College of Medicine in Houston is in default on some of the financial covenants under the indenture for its Harris County Health Development Facilities Development Corp. revenue and revenue refunding bonds, according to a notice to bondholders.

The college said it is in default in connection with a breach of its agreement to maintain a historical/pro forma debt service coverage ratio of at least 1.0 to 1.0 in each fiscal year and a breach of its agreement to prevent the capitalization ratio from exceeding 0.7 to 1.0 as of the end of each fiscal year.

According to the notice, the college is taking corrective action in connection with the covenant defaults.

These actions include engaging management consultant Navigant to recommend changes in its revenue-producing activities and expenses, adopting a revised operating budget to reduce its operating deficit for the current fiscal year, entering discussions concerning a possible joint undertaking to complete, own and/or operate its hospital and clinic project and entering discussions with William Marsh Rice University toward a possible combination that would result in a change in control and limited financial subsidy.

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