This summer we closed a $375 million warehouse facility, and we have said that it is a first step toward term securitization. Hospitals sometimes ask what that means for them. The short answer is: lower and steadier funding costs, and a great deal more scrutiny of us.
In a securitization, a pool of our agreements with hospitals is sold to a trust, which issues notes to investors. The investors are repaid from the hospitals’ payments. Nothing changes for the hospital: Wardmore still services the agreement, and the hospital still deals with us.
What changes is that the pool is reported on every month: collections, delinquencies, losses, prepayments. Two rating agencies review it before the notes are issued and keep reviewing it afterward. Investors read those reports closely.
We think that is healthy. A lender whose performance is reported every month has every reason to make its agreements work for the hospitals it serves.