NATCHEZ — Despite seeking to file bankruptcy, Natchez Regional Medical is not in danger of defaulting on its taxpayer-backed revenue bonds, the hospital’s attorney said.

In addition to its other debts, the hospital owes a balance of approximately $14.5 million on the $18.075 million bonds issued in September 2006, attorney Walter Brown said.

“We are required by the Mississippi Development Bank to set aside one year’s payments and a letter of credit,” he said. “Each month, we escrow into a sinking fund one-twelfth of their payment as it comes due. There are several years of liquidity there.”

The county-owned hospital’s trustees announced this week their intention to file Chapter 9 bankruptcy, citing — among other things — a decline in revenue that left the hospital with $3 million more in financial liabilities than in assets.

Even though the hospital is county-owned — it was built in the late 1950s with county, state and federal funds — state law keeps its financial books separate from the county’s.

The Adams County Board of Supervisors formally adopts the hospital’s annual budgets as prepared by the hospital’s trustees, but NRMC does not receive tax support and has been self-funded since 1974.

However, when the hospital sought to have its revenue bond reissued in 2006, the MDB required the hospital to get the county’s backing with a 5-mill standby tax and a $775,000 letter of credit that would not be collected unless it was needed.

According to a public disclosure document by Adams County and the MDB from March 2012, NRMC originally borrowed $16,220,000 in Hospital Revenue Refunding Bonds for the purpose of reducing the costs of interest associated with its then-existing obligations.

The 2006 refinancing restructured the debt from the 1996 bonds in addition to rolling in additional funds that were used to refinance other notes and leases, make improvements to the hospital, purchase equipment and pay legal, administrative and engineering costs.

The bond is callable in 2016, which means it can be paid off without penalty. If it is paid off before that point, Brown said the repayment could carry more than a million dollars worth of penalties with it.

“The bonds will have the highest priority in the bankruptcy classification,” he said.

“You would have to continue to pay the bonds we have, and if there was a sale you would have to defease the bonds. You would essentially buy securities to pay those bonds as they come due until the redemption date of July 2016.”

Adams County Administrator Joe Murray said the county government is trying to find out how the bond issue will affect the county liability-wise if the bankruptcy is or is not granted.

“Until they work out the whole bankruptcy thing and the bankruptcy attorney who is designated for the hospital gets in and reads the language of the bonds, we aren’t sure what that means for us,” he said.

When NRMC declared bankruptcy in 2009, the hospital never missed a bond payment.

Before the bankruptcy can move forward, the state legislature has to pass a special bill allowing it. The request for the bill has been sent to Adams County’s legislative delegation, and was reportedly being drafted this week.

Prior to the bankruptcy move, NRMC was being marketed for sale and negotiations with a buyer were reportedly under way.

Healthcare Management Partners was hired to market the hospital, and Brown said the company is still working for the sale.

HMP’s contract was for a minimum fee of $300,000 with a cap of $500,000 based on hourly fees.

“They had a set fee, and it was paid many months ago,” Brown said. “They are operating essentially on their own.

“(The contract) provides either party can terminate the contract after a certain period, but that would be a mistake, having made the investment, and we are beginning to see today some affirmative responses in our negotiations.”

HMP led the effort to sell the hospital as part of the 2009 bankruptcy, though the effort was unsuccessful. Brown said his suggestion is people not look to the worst-case scenario when assessing the hospital’s situation.

“In my opinion, there is going to be a sale, and I believe it will be enough to pay off the bonds,” he said. “Hopefully, it will be a sale that will be a positive collaboration between NRMC, the potential buyer and a teaching hospital as a partner in that proposition.

“The interest has increased in this as a tremendous opportunity and — to look at this in a positive way — make this a real, regional health care community.”