Help on $4b loan repayment eyed by CUHK Medical Centre

James Lee

A move is under way to extend the repayment period of a HK$4 billion government loan taken out by the Chinese University of Hong Kong Medical Centre for five years to 2028.

The revised schedule would "allow reasonable time for CUHKMC to overcome its cash crunch in the early stage of operation," according to a paper submitted to the Legislative Council by the Health Bureau yesterday.

That will be discussed by the legislature's finance committee on Friday.

If the recommendation is accepted then the first repayment, scheduled for March 19, will be deferred to March 2028, with 10 annual installments until March 2037. The legislature approved the HK$4 billion loan in April 2015.

"The revision to the loan arrangement will help sustain CUHKMC's operation, which in turn will be conducive to maintaining the service capacity of our health-care system catering for the rising health-care service demand in Hong Kong," the bureau said.

The private teaching hospital provides 215 beds and offers services in more than 30 medical specialties. It is expected to provide 516 hospital beds in phases up to 2027.

But patronage in private hospitals overall has plummeted during the pandemic, with the overall bed occupancy rate falling from 62 percent in 2019 to 47 percent by early last year.

The Health Bureau also said the center would not be able to sustain operations without government assistance as it expects a negative cash balance from this year to 2032, bottoming out at negative HK$2 billion in 2027 if the original loan repayment schedule proceeds.

Under the proposed loan arrangement, the center's cash balance will decrease from HK$578 million in 2023 to HK$289 million in 2025 before starting to increase from 2026 on.

It is expected to record profit starting from around 2027 taking into account interest, tax, depreciation and amortization.

The bureau proposes that the medical center provide public medical services throughout a 15-year period commensurate with the estimated HK$1.12 billion in interest foregone due to an extension of the repayment schedule.

And if the center falls short on the obligation the government reserves the right to extend the delivery of public medical services beyond the 15-year period or request liquidated damages.

It will also consider nominating delegates to the center's board of directors and request reports on the hospital's annual business plan and financial status in the two years before the first proposed repayment date in March 2028.

The center has also explored the possibility of arranging a loan of at least HK$600 million with banks as an alternative solution for repayment of the first government loan installment.

cjames.lee@singtaonewscorp.com