We can count BJC Health System among the victims of the meltdown in the auction-rate debt markets, after all.

BJC served notice Monday that it plans to refinance its $243.6 million in auction-rate bonds or convert them to “another type of interest rate mode.” The bonds, which represent about one-third of the hospital chain’s outstanding debt, have become too costly; BJC had to pay as much as 11.99 percent interest last week.

When I talked to her for last Friday’s column, however, BJC spokeswoman Kim Kitson seemed to minimize the effect on the hospital chain. She told me:

At this point we have not experienced any failures. We are seeing a little bit of a higher rate. 

Another spokeswoman, June Fowler, told me today that the bonds have a cap of 12 percent. That’s the rate BJC would have had to pay if an auction had failed to draw enough bids. So, technically, the auction didn’t fail.  BJC did get bids, although they were for such a high rate that the outcome was virtually the same as a failure. During normal times, Fowler said, BJC was paying between 3 percent and 5.5 percent on its auction-rate bonds.

Though BJC’s Kitson seemed to minimize the change in rates, the difference between 11.99 percent and 5.5 percent, if applied to the whole $243 million in bonds, amounts to roughly $300,000 a week. Other borrowers, like Tal Heppenstall, treasurer of the University of Pittsburgh Medical Center, weren’t so placid about the increase. UPMC’s debt, a Bloomberg story reports, jumped to between 14.99 percent and 17.23 percent, up from a normal rate of 3.5 percent. Heppenstal is quoted as saying:

It’s outrageous. We’re a AA-rated credit. We don’t need to get financing from loan sharks.

BJC, like UPMC, has a double-A bond rating. The good news, Fowler says, is that rates came down in auctions this week. Some bonds were reset yesterday at 9 percent, and some today at 6 percent. Still, the hospital group is beating a hasty retreat from a corner of the bond market that has suddenly become unreliable.