Grim debt prognosis at health nonprofits
The credit crisis is inflicting pain on the country's already troubled nonprofit hospitals and health systems. Like many other issuers, nonprofits use a technique known as swaps to lower the overall interest cost on their variable-rate bonds. They pay a fixed rate to a counterparty and receive a floating rate in return. The floating rate they receive should cancel the floating rate they pay, ideally leaving them with a lower fixed rate. But the market moved against them as swap rates fell from the level at which they wrote the deal. They now have to post more collateral with the counterparty, or face larger payments to terminate the swap.
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