Today, Friday, key decisions regarding the future of the Zürcher Oberland Health Centre (GZO) and Wetzikon Hospital were made at a closed meeting of bondholders, representing a nominal value of 170 million Swiss francs.

The meeting, requested by the GZO Creditor Group led by Gregor Greber, sought an extension of the bond term. While the appeal «Help save Wetzikon Hospital» features prominently on the group's website, their primary concern appeared to be financial. Although the two-thirds quorum for approval was narrowly missed, bondholders sent a clear signal. Many of them likely acquired bonds after the debt restructuring moratorium or the default in May and June.

Write-offs, Debt Haircuts, Equity Injection

In the run-up to the meeting, the GZO itself had announced that there was a massive need for depreciation of 97 million to 127 million francs with regard to the new building — where work has been suspended for some time — which was immediately disputed by bondholders' representatives, as finews.ch reported. The valuation of the properties is decisive for determining whether a debt haircut is needed and, above all, how deep it must be.

The GZO had also previously said tp provide more detailed information about the restructuring concept at the meeting, although it has been known for some time that, in addition to a haircut, this includes an equity injection by the twelve shareholder municipalities and a solution for the extension.

Do it Without Two-Thirds of the Investment?

The two trustees appointed by the Hinwil District Court, lawyers Brigitte Umbach-Spahn and Stephan Kesselbach—both partners at Wenger Plattner—also aimed to assess the restructuring concept. Their opinion holds particular weight, as they are legally required to represent creditors' interests.

As can be seen from the GZO's media release published late on Friday morning  on the restructuring concept drawn up with the help of the auditing and consulting firm PwC, the haircut for the creditors — and thus also for the bondholders — is expected to be quite harsh with an estimated estate dividend of 30 to 35 percent. This is the result of a comparison of the cash and cash equivalents expected for spring 2026 and the expected debt level.

A Bird in the Hand is Worth Two in the Bush

The GZO managers are aware that this represents a high price for the creditors. However, from today's point of view, it is the economically better solution for this than bankruptcy, the GZO comforts investors, suppliers, etc., who are to waive two-thirds of their claims. The loss is sweetened by the forecast that the money will flow more quickly than in a liquidation.

GZO bonds had been traded on the SIX Swiss Exchange in a band of between 40 and 45 percent in recent weeks. On Friday, stock exchange trading was suspended.

No Binding Commitment from the Shareholder Municipalities

The need for impairment is estimated at around 110 million francs. This «an expression of the low operating profitability and the significant need for investment, including additional costs in connection with construction.»

The GZO also announces a substantial increase in equity capital by the shareholder municipalities, «in the mid-double-digit million range». This had been agreed with representatives of the shareholder municipalities «in intensive preliminary talks». However, it is not a binding commitment, because it requires going through the municipal court process (up to the municipal assembly).

Balanced Compromise or Restructuring on the Backs of the Creditors?

The GZO describes the restructuring concept as a «balanced compromise», overall, an assessment that many creditors are unlikely to share. The aim of the restructuring concept was to restructure the balance sheet and ensure the long-term provision of health care for the population – and later to integrate it into a hospital network. Only then will the new building be completed.

The trustees will have to decide by the end of the year whether they consider the present restructuring concept to be a suitable basis for applying to the court to transfer the GZO from a provisional to a definitive debt restructuring moratorium. The alternative would be bankruptcy.

Broad Circle of Stakeholders

Stakeholders in the GZO case include not only the roughly 900 employees and the surrounding region but also the twelve shareholder municipalities as owners, as well as the creditors, such as the bondholders of the GZO bond, which has been due since June.

However, the case is of interest far beyond this circle: Will hospitals continue to be able to finance themselves on the Swiss capital and credit market at reasonable conditions in the future?

What Are the Effects on the Capital Market?

Will implicit guarantees from the public sector generally have to be assessed more critically in the future – a shift that would generally increase costs for related debtors seeking funds? Until Zurich's health director Natalie Rickli declined to provide emergency aid from the canton to the GZO in May, most credit experts had assumed that the hospital would not be left unsupported.

Furthermore, how sustainable and effective is a healthcare system where hospitals are expected to be financially independent but have limited flexibility in setting prices for their services? Wetzikon Hospital is an extreme example due to its construction project, which now appears oversized from today’s perspective. Yet, financially, most hospitals are already on shaky ground.

Do Hospitals Actually Make any Profit at All?

For instance, Kurt Hess, a respected figure in credit analysis in Switzerland and currently a senior credit analyst at Independent Credit View, recently remarked at an event in Zurich that lending to hospitals may not be viable if assessed solely on their financial health. Key financial metrics for hospitals are typically weak, and future prospects are bleak.

From Zurich to Wetzikon: A media conference is scheduled here on Friday afternoon, where GZO Administrative President Jörg Kündig and Hospital Director Hansjörg Herren will address questions about the renovation plan. The two trustees will also be in attendance.