State-funded St Vincent’s used as private collateral
HSE in dispute with the hospital group over loans which funded a new building, car park
Published 11/04/2010 | 08:44
THE state-funded St Vincent’s University Hospital was put up as security against bank loans to fund a new building in the hospital’s private wing and a new car park.
The charge was secured by Bank of Ireland and Ulster Bank over all the assets of St Vincent’s Healthcare Group, which controls the public and private hospital as well as St Michael’s in Dun Laoghaire.
The HSE is understood to have taken exception to the fact that a public hospital funded by the taxpayer was included as collateral against bank loans. The health authority has asked the hospital to have the banks’ charges over the public hospital rescinded before it releases the funds for a new building for cystic fibrosis patients, according to sources.
The banks’ lien over the property means that they would have first call over the assets if the Sisters of Charity, who own the hospital group, should sell the valuable Dublin 4 site and could theoretically force the sale of the group’s assets.
However, in a statement this weekend, St Vincent’s Healthcare Group (SVHG) has described the dispute with the HSE as an “administrative issue”.
The dispute over the rights to the property emerged during the planned development of a new building for cystic fibrosis and liver transplant patients at the public hospital, for which the State has provided €34m in funding.
According to the HSE, the funding is conditional on the State getting a lien over the public hospital to protect the State’s investment in the facility.
During consultations with the HSE, St Vincent’s Healthcare Group disclosed that this wouldn’t be possible because the two banks already had a lien over the public hospital.
The group has agreed only to provide the hospital with a lien over the new building. The ensuing stand-off could delay the release of funding for the cystic fibrosis unit until the situation is resolved, sources said.
The HSE introduced a requirement several years ago of securing a charge over voluntary public hospitals in return for state funding.
The hospitals are required to sign a so-called “protection of the State’s interest” document which gives the State a charge over the facilities in return for the investment. The Mater hospital in north Dublin signed the document giving the HSE a lien on the public hospital in return for public funding of its new wing in December 2008.
A statement issued on behalf of St Vincent’s this weekend said “an administrative issue had arisen with the HSE that we hope can be satisfactorily resolved very shortly”.
“To secure the taxpayers’ interest in the case of the finance required for the building of the new ward block (that will be used by SVUH, ie the public hospital), SVHG has given the HSE an assurance that it can have a lien on the ward block and SVHG is willing to totally underwrite the return of the building and any finance to the HSE if the Group were to discontinue providing healthcare facilities.
It has also provided the HSE with an assurance that it is the Group’s intention to continue indefinitely in the provision of healthcare,” it said.
The statement continued: “As the other agreements were entered into with the banks before this 120-bed ward block project came on stream, the group cannot provide ‘first call’ to the HSE in relation to all of its assets . . . As the ward block is a separate project we do not see why it should be necessary to rescind any other historical arrangements and we have advised the HSE of this position.”
The latest accounts for St Vincent’s Healthcare Group said the company has guaranteed bank borrowings of more than €37m which are secured by charges over the assets of the two subsidiary companies.
Ulster Bank was given a charge over the group — including the public hospital — five years ago for a loan to build a new car park in the grounds. Bank of Ireland, which financed a new building for St Vincent’s Private, two years ago, was also given a charge over the group’s assets.
Both banks have fixed charges against the respective buildings they financed.
“These ‘fixed charges’ are less than the value of the buildings but as the group is the ultimate guarantor of the projects both banks have ‘floating charges’ against St Vincent’s Hospital Group,” the statement said.