CHICAGO - ThedaCare Inc. and Marquette University - two Wisconsin-based tax-exempt borrowers that sought first-time ratings - joined the list of issuers with deals on hold this week due to the rise in long-term interest rates, although Marquette did move forward with its floating-rate tranches due to its cash needs.
The Wisconsin Health and Educational Facilities Authority is serving as the issuer for ThedaCare's $128 million new-money and refunding sale and Marquette's $110 million new-money and refunding issue. Both sought published credit ratings for the first time - a shift from their past practice of issuing their bonds without a rating but with triple-A rated coverage before the monoline insurers were downgraded.
Marquette sold its two floating-rate, adjustable demand revenue and refunding series for $31.8 million and $18.8 million early in the week, capturing an interest rate of about 6%. The bonds will be remarketed weekly. Robert W. Baird & Co. is the underwriter and remarketing agent.
Lehman Brothers was originally a co-underwriter, but the university dropped the firm as its future was uncertain given its holding company's filing for bankruptcy late last month as the university was preparing to send out its offering statement. JPMorgan Chase Bank is providing a letter of credit.
The Milwaukee-based university opted to go forward with the variable-rate series, as it included much-needed funds to finance construction of its new law school building.
"The hole is dug and we need the funds," associate vice president of finance John Hansen said. "We felt that the fact is at some point the variable rates are going to come down" in the coming weeks.
Marquette's two fixed-rate series, each for $29.5 million, remain on the day-to-day calendar as does ThedaCare's deal. The university won't sell until it can capture an interest rate with an average coupon of no more than 5.7%.
The overall transaction also includes a current refunding of 1998 debt and the refunding of outstanding variable-rate debt from 2002 that had seen increased interest rates after its insurer - the former XL Capital Assurance - was downgraded.
Marquette received a rating of A2 from Moody's Investors Service affecting a total of $237 million of debt. The school benefits from solid growth in its financial resources of nearly 50% between fiscal 2003 and 2007 to $429 million due to strong fundraising and improved investment returns. The school of more than 10,000 students had a selectivity rate of 67% for fall 2007 based on growing application numbers due to its strong presence in its core markets and efforts to enhance its campus facilities.
Its challenges include its dependence on Illinois and Wisconsin for students and the need to expand recruiting efforts given the anticipated declines of high school graduates in those states over the next decade. The private Jesuit school, which was founded in 1881, also has a lower ratio of financial resources per student than its peers in the A-rated category.
The four-hospital, Appleton-based ThedaCare, formerly known as United Health Group Inc., received initial ratings of AA-minus from Fitch Ratings and an A1 from Moody's, affecting a total of $265 million of debt.
The roughly $53 million of new-money proceeds from the transaction will finance the construction of new outpatient facilities and the conversion of beds at its Appleton Medical Center and Theda Clark Medical Center to private rooms, which includes the construction of a new patient tower at the Appleton facility.
The system's credit benefits from a leading market position of 47.2% in Appleton and the Fox Cities region in northeast Wisconsin, robust profitability, and sound and growing liquidity of $279 million at the end of fiscal 2007. Offsetting some of its strengths is its increasing debt burden and competitive service area.
