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County to escrow hospital-sale proceeds to defease outstanding bonds
Summary
Board approved moving forward with a defeasance agreement so sale proceeds from the county hospital can be placed with a third‑party fiduciary to satisfy outstanding hospital bond debt when bonds become callable.
Oktibbeha County supervisors approved a plan to put sale proceeds from the county hospital into escrow with a third‑party fiduciary to defease outstanding hospital bonds.
A county representative told the board the hospital has approximately $15,360,000 in outstanding bond debt. The county has approved a purchase agreement with Baptist for the hospital sale; because some bonds are not yet callable, staff and legal counsel recommended using an escrow (a defeasance agreement) so funds from the sale can be invested to meet future payoff dates. Under the defeasance arrangement, an independent escrow agent holds proceeds and pays bondholders when contractual call dates arrive.
Officials said the accounting effect is that the bonds will be removed from the county's books for reporting once the escrow arrangement is in place, but the county will not remove the bonds from tax rolls until the sale closes and related timing requirements are met. Staff noted the sale has to close before tax and millage changes tied to the property can be finalized.
Board members asked clarifying questions about which series of bonds are affected (board discussion referenced bonds issued in 2013, 2018 and 2019) and how escrow investments handle timing and interest-rate differences; staff said escrow agents commonly use timed investments so the amount set aside will grow to meet the required payoff rather than the county being required to deliver the full callable amount on closing.
The board directed staff and counsel to finalize the defeasance agreement and to execute the escrow arrangements at closing.
