The Proton Center of Arkansas, one in all a series of struggling bond-financed cancer treatment centers across the country.
The Proton Center of Arkansas
The brand new 12 months rang in fresh signs of distress at a pair of long-struggling cancer treatment centers in Maryland and Arkansas financed with bonds through Wisconsin’s conduit issuer the Public Finance Authority.
The Maryland Proton Treatment Center defaulted on an $8.7 million interest payment due Jan. 1 on $267 million of unrated municipal bonds, in accordance with a posting on EMMA. The middle has faced strains almost because it first floated the debt in 2018, and has tapped debt service funds to make previous payments. No principal payments will probably be made on the subordinate and junior bonds, the notice said.
The Proton International Arkansas, LLC reported on EMMA that it will miss an interest payment on subordinate bonds and could be forced to shift money from its liquidity support fund to the debt service fund to make the Jan. 1 interest payment on the senior bonds.
The bond trustee in each cases is UMB Bank NA, a trustee that bondholders often herald when an obligor faces stress.
It’s the most recent sign of distress amongst proton treatment centers financed with speculative-grade municipal bonds. Proton therapy more precisely targets radiation to tumors, with less damage to surrounding tissues than other radiation therapies. The treatment is dear, not at all times covered by insurance, and has not gained widespread acceptance. The centers depend on patient revenue for bond payments and lots of have struggled to construct volume, especially within the wake of the COVID-19 pandemic.
Limited insurance coverage hampers the sector, said Steve Hicks, CEO of Provident Resources Group, Inc., which owns a $416 million Georgia proton center that has missed bond payments.
Provident acquired the already-distressed Georgia ProtonCare Center
in 2016.
“With the introduction of pencil beam technology within the late Nineties, proton therapy stays one of the best #1 modality of treating cancer in children,” Hicks said in an email. The variety of cancers eligible for proton therapy has “significantly increased,” he said, adding that the GPCC treats roughly 100 patients a day.
“Today, even with over 40 proton therapy centers operating within the U.S., we’re still grossly underserved. Once I was first introduced to proton therapy in 2005, there have been only 4 within the U.S. Insurance carrier guidelines proceed to hinder the expansion of proton therapy,” Hicks said.
Most of the headwinds facing the centers are outside of their control, said Andy Phillips, general counsel for Wisconsin’s PFA, through which lots of the facilities accessed the muni market.
“Thanks largely to the Covid pandemic and other outside economic pressures, there have been negative impacts on the bonds supporting these cancer treatment facilities,” Phillips said in an email. “PFA will proceed to work in an ongoing fashion with bondholders and investors to make sure that these projects proceed to supply an ongoing public profit and important take care of patients in need.”
The Proton International Arkansas in addition to Recent Jersey’s Procure Proton Therapy Center — also financed by the PFA — each marked first-time defaults within the third quarter, in accordance with Moody’s Investors Service. The Maryland center has been in default since 2022, in accordance with Moody’s.
A Delray Beach, Florida center, Proton International-Delray, LLC., also financed by the PFA, posted its latest notice of default in November for failure to realize debt service coverage ratios and days money available.
In 2020, a trio of proton centers in Tennessee and Florida filed for bankruptcy, affecting greater than $360 million of bonds. Provision Cares Proton Therapy Centers in Nashville and Knoxville, Tennessee., and a related center that was being inbuilt Orlando, Florida, filed for Chapter 11 within the U.S. Bankruptcy Court in Nashville. They cited low patient volume, the covid pandemic and cyberattacks as driving the insolvency. The case was closed in September 2023 with bondholders receiving roughly 58.1 million, in accordance with court filings.