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Presence Health gets breathing room with loan

Presence Health secured a $528.1 million short-term loan from JPMorgan Chase last week, buying time as the largest Catholic hospital network in Illinois attempts to resuscitate itself.

The 11-hospital system, based in Chicago, will use debt to pay off loans that it received from seven banks in 2013, including JPMorgan. Terms of the short-term loan, known as a bridge loan, were not available.

Presence violated the financial conditions of the bank loans after reporting an unexpected loss of $186 million last year.

The hospital chain was talking with the banks to amend the terms of the 2013 debt when JP Morgan offered the bridge loan, said CEO Michael Englehart. He said the bridge loan gives the health system time to restructure all of its debt, which stands at about $1.1 billion.

"The bridge loan was by far the better solution for Presence Health," Englehart said.

The new borrowing is a step in the right direction for Englehart's turnaround plan, considering Presence's creditworthiness is on the low end of investment grade, said Richard Ciccarone, president and CEO of the bond analysis firm Merritt Research Services.

Englehart is trying to stabilize Presence's financial picture after the loss. About half of the loss was due to a poor collections system, which forced the hospital chain to write off some bills because they were too old to collect.

Part of Englehart's plan to return Presence to health is to slash costs. It plans to eliminate 700 positions by the end of the year, including 250 layoffs.

According to unaudited first-quarter results, operating losses, including $5.2 million in turnaround costs, were $25.8 million, which was better than the hospital had forecast.

asachdev@tribpub.com

Twitter @ameetsachdev

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