The Stevens & Lee Companies Multidisciplinary Team Creates Transformational Solution for Caron

Company Overview
Founded in 1957, Caron is an internationally recognized nonprofit organization which offers a full suite of high-end, best-in-class and state-of-the-art substance abuse and behavioral health solutions from a number of facilities, located principally in Pennsylvania and Delray Beach, Florida.

Situation
In late 2015, Caron asked Griffin to review and comment on Caron’s 2015-2018 Strategic Plan, including its 2016-2018 Capital Plan.

When reviewing Caron’s Capital Plan, Griffin observed, among other things, that Caron had historically funded capital projects from cash on hand, accumulated from both operations and giving, and in doing so financed long-lived assets with current funds, resulting in low liquidity and underleverage compared to its peers. Griffin and Griffin’s affiliates, FSL Public Finance and Stevens & Lee also observed that the interest rates, maturities, amortization schedule and covenant package on Caron’s outstanding debt were all less favorable than those available in today’s debt market for comparable credits.

Solution
In connection with its review of Caron’s capital plan, Griffin and FSL Public Finance explored alternatives for strengthening Caron’s balance sheet including both debt restructuring and new money debt issues to fund a substantial portion of Caron’s 2016-2018 capital projects while retaining cash on hand and gifts to bolster liquidity.

Outcome
As a result of an extensive competitive process conducted by FSL Public Finance, Caron was able to refinance its outstanding debt and raise low-cost, fixed rate capital from a large bank at markedly better interest rates, over a longer term and on an improved amortization schedule and with a much lighter covenant package than previously in place. This enabled Caron to significantly bolster its balance sheet liquidity and provide future financial flexibility, and to potentially generate investment income on such retained additional liquidity. Furthermore, the longer-term debt provided Caron with more prudent asset and liability matching.