H2C CAPITAL MARKETS
August 27, 2020
On Wednesday, August 26, Catholic Health Services of Long Island (NR/A-/A-) (“CHS”) priced $400,000,000 taxable 30-year, fixed-rate bonds (“Series 2020 Bonds”). The proceeds of the bonds will be used to fund strategic investment in CHS facilities. H2C acted as financial advisor to CHS on the transaction.
Pricing Summary
- $400,000,000 taxable, 30-year bonds due July 1, 2050; yield of 3.368% (+195 bps spread to 30-year UST).
Highlights
- For the past several years, CHS has been implementing a long-term strategic plan, Vision 2022. Vision 2022 includes significant reinvestment in CHS facilities and ambulatory expansion to improve the system’s competitive position. Specifically, the Series 2020 Bonds proceeds will be used to fund the construction of a new patient pavilion for Good Samaritan Hospital.
- Originally, CHS planned to fund the construction costs with tax-exempt bonds; however, in 2018, CHS started tracking taxable rates due to the low attractive yields and flexibility presented by the corporate taxable market.
- H2C assisted CHS in evaluating tax-exempt and taxable financing options at different tenors. CHS ultimately decided that current long-term taxable rates provided CHS with attractive, historically low funding costs without the restrictions inherent in tax-exempt financing.
- CHS has also been consistently paying down its outstanding debt as well as preserving and building its cash balances in anticipation of the upcoming expenditures for the construction of the pavilion. As a result, CHS had ample debt capacity for the Series 2020 Bonds and was able to maintain its A-/A- credit rating in spite of the sizable par amount.
- CHS represents the first pure “A-“ credit to have issued long-dated taxable bonds of size recently. The +195 bps spread represents the lowest spread for a pure “A-” NFP healthcare credit since the pandemic started.
- The Series 2020 Bonds are part of a two-pronged plan of finance. On August 17, CHS also issued a $75,000,000 taxable, 10-year fixed-rate term loan to refund outstanding indebtedness and fund general corporate expenditures.
- As part of the issuance of the Series 2020 Bonds and the $75,000,000 term loan, CHS, with the advice of H2C and the working group, restated its existing MTI with an Amended and Restated MTI that allowed CHS to drop a mortgage provision, improve definitions and covenants, and add new GAAP and force majeure provisions.
For more information, please contact Michael Hammond or Elaine Yao.
ABOUT HAMMOND HANLON CAMP LLC
Hammond Hanlon Camp LLC (“H2C”) is an independent strategic advisory and investment banking firm committed to providing superior advice as a trusted advisor to healthcare organizations throughout the United States. H2C’s professionals have a long track record of success in healthcare mergers and acquisitions, capital markets, real estate, and restructuring transactions, acting as lead advisor on hundreds of transactions representing billions of dollars in value.
Hammond Hanlon Camp LLC conducts securities-related engagements through its wholly-owned subsidiary, H2C Securities Inc., member FINRA/SIPC. For more information, visit h2c.com.
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