$14-million bond offer to pay for the new Surgical Wing of King Edward VII Memorial Hospital (KEMH).

The offer, involving eight percent bonds in units of $2,500 each, can be issued in Bermuda or US dollars, and is being underwritten and sold by The Bank of N.T. Butterfield & Son Ltd.

The offer closes at noon June 6.

The bank's Butterfield Corporate Services Ltd. is the registrar and transfer agent and The Bank of Butterfield Executor & Trustee Co. Ltd. is the trustee.

Legal advisers are Appleby, Spurling & Kempe.

The BHB financed the construction of the new surgical wing by obtaining a bridging loan from the bank. This offer's purpose is to raise sufficient funds to discharge the board's obligation under the bridging loan ($6.5 million), to meet most of the estimated remaining costs of constructing the new wing ($7,290,000 out of a total estimated remaining $8 million) and to enable the BHB to pay expenses ($210,000) in connection with the offer.

The bonds are to be issued in denominations of $2,500 in both US and Bermuda dollar certificates, with eight percent interest payable half yearly (June 30 and December 31) and may be listed on the Bermuda Stock Exchange (BSX), pending approval, as of June 16.

The first interest payment December 31, 1997 will represent slightly more than six months and will be prorated to reflect that.

The BHB may not redeem the bonds before the fifth anniversary of the end of the offer period, although they have every right to purchase them in the market.

After June 6, 2002, the BHB, after 30 days written notice, can redeem the bonds from bond holders at par value, subject to interest payment to the date of redemption.

The BHB will pump $850,000 annually into a sinking fund they have created to help fund the repayment upon maturity. The prospectus said, if invested to earn an interest rate of 5.6 percent per annum, the sinking fund will yield the necessary interest to repay the bondholders.

The bank will subscribe for any balance of unsubscribed bonds, and will be paid about $150,000 for its services.

The Bank of Butterfield Executor & Trustee Co. Ltd., with about $15 billion under administration, is to be paid a trustee fee of a minimum of $2,500 per year.

Bermuda Monetary Authority (BMA) permission was sought and obtained for the free transferability of the US dollar bonds between persons designated non-resident for exchange control purposes, as long as the bonds are listed on the BSX or other recognised exchange. The BMA also authorised the BHB to issue US$14 million.

Executive director of the Bermuda Hospitals Board, Sheila Manderson, said the building is expected to be completed by April and is to be furnished with $3.5 million worth of equipment which is the subject of a capital fund raising campaign by Health Alliance.

Ms Manderson said, "The project is being done in two phases: the construction of the new wing and then the renovations of the existing operating rooms.'' The prospectus for the bond offer indicates though that phase one, the new wing, is expected to be completed by January 1998, and phase two by December 1998.

She added, "We knew that we were going to have a bond offering to help finance this project from the very time that we began negotiations with the bank. It was agreed upon almost 18 months ago. We knew it was part of our arrangement with the bank.'' The BHB which will net proceeds of $13,790,000 from the offer, will pay interest payments to bond holders as part of their operating expenses.

BHB chairman, Clem Talbot, said: "With the $14 million worth of debt, every six months the BHB will be paying to the registrar for disbursement to bondholders (about $1.1 million per annum).'' The money is budgeted as part of the operating costs of the Bermuda Hospitals Board.

The BHB spent $86,221,367 in operating expenses in the year to March 31, declaring a net loss of $387,580, largely as a result of a $960,377 net operating loss from St. Brendan's Hospital.

Bond offer St. Brendan's is the recipient of a government grant or subsidy (1996: $15.5 million) which represents 94.4 percent of total revenue. Mr. Talbot indicated that the BHB is fully reimbursed by government for the budgeted St. Brendan's shortfall.

Bermuda Hospitals Board officials are optimistic that fiscal `97 to March 31 produced better results.

BOND OFFER -- Bermuda Hospitals Board executive director Sheila Manderson (centre) and chairman Clem Talbot (right) are joined by Bank of Butterfield senior manager, Bruce Sharpe, in studying details of the prospectus for the bond offer that is being made today.

FINAL LOOK -- This is an artist's impression of the final look of the new wing at King Edward VII Memorial hospital, once the $14-million works are completed.

HOSPITAL HOS