Illinois Agency OKs $1B of Hospital Deals

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CHICAGO — The Illinois ­Finance Authority board signed off on more than $1 billion worth of nonprofit health care deals and accepted the resignation of executive director John Filan, but then rehired him in an advisory capacity to help implement a revamped $3 billion program for renewable energy.

The board gave final approval to the issuance of up to $150 million for Central DuPage Health, up to $210 million for Rush University Medical Center Obligated Group, up to $350 million for the University of Chicago Medical Center and up to $200 million for Provena Health.

Filan’s resignation, effective July 1, fulfills a commitment Gov. Pat Quinn made to House Speaker Michael Madigan last month. Madigan specifically targeted Filan in so-called fumigation legislation he proposed to purge state government of about 700 political appointees made by former governors Rod ­Blagojevich and George Ryan. Blagojevich faces a federal corruption trial on pay-to-play charges and Ryan is serving a federal prison term for corruption.

Filan served as the top state fiscal officer under Blagojevich and then as a chief operating officer before the former governor appointed him to the IFA post last fall. Filan and lawmakers butted heads frequently during his tenure as budget chief and it irked Madigan and other lawmakers that Filan remained on the state payroll under Quinn, the state’s lieutenant governor who took office in January after the General Assembly removed Blagojevich.

Quinn had been reluctant to force Filan out. The two men are longtime friends dating back to their work on former Democratic Gov. Dan Walker’s campaign 35 years ago. With Madigan’s legislation pending, Quinn asked the speaker to remove the language targeting Filan so he could exit on his own by July 1. Madigan made the agreement public on the House floor prior to the vote last month on the legislation. The House passed the legislation, but the Senate never voted on it.

IFA board chairman William Brandt said yesterday the board formally accepted Filan’s resignation but then asked him to remain with the agency in an advisory role for up to 120 days to assist in implementing a revamped renewable energy program with $3 billion worth of state-backed bonding authority.

Filan led the IFA’s energy initiative aimed at leveraging federal funds for the development of renewable energy projects available through the U.S. Department of Energy from the federal stimulus program that expands the scope of the Energy Policy Act of 2005 to provide as much as $100 billion in loans nationwide.

“John was the architect and really measurably responsible for this energy legislation that really expands the mission of the IFA, and so to provide an ample transition period we asked John to stay around in an advisory capacity given his understanding of the program,” Brandt said.

Filan would continue to receive the same amount of pay under the resolution approved by the board.

Brandt said he might seek Filan’s advice on other IFA-related matters, but he would no longer manage staff. Deputy director Chris Meister and chief financial officer Yvonne Towers will have legal powers to represent the IFA until Quinn submits two nominees for the board’s consideration to fill the post as required under the the agency’s state statutes.

State legislation approved recently by the General Assembly clarified and expanded the state’s $3 billion bonding authorization for energy projects with a focus on renewable energy. The bonds would carry the state’s moral obligation pledge. The IFA has been named by the U.S. Energy of Department as one of eight state authorities to be part of a pilot program with the DOE to assist in developing underwriting criteria for federal loan guarantees.

Quinn spokesman Robert Reed said the governor supports the action. “We think it’s for the good of the agency in terms of continuity and to ensure a smooth adjustment,” he said.

Representatives for Madigan did not respond to a request for comment.

The struggling Provena is planning to sell on Wednesday $175 million of fixed-rate refunding bonds that will refund a line of credit that financed various projects. The system will follow up the fixed-rate transaction with the restructuring in July of $138 million of variable-rate bonds that will carry a letter of credit from JPMorgan.

Provena operates six hospitals, 16 long-term care and senior facilities, and 28 clinics in Illinois and Indiana and had operating revenues of $1.25 billion in fiscal 2008. The system’s $645 million of debt is rated BBB-plus with a negative outlook by Moody’s Investors Service and BBB-plus with a negative outlook by Standard & Poor’s.

Moody’s warned that since its downgrade of the credit in February the system has seen further volume declines but has also implemented various savings plans so that income is above budget. The floating-rate deal set for later this summer also will reduce bank exposure and eliminate accelerated debt repayment of bank bonds. The system is working with Wellspring Partners on a turnaround plan.

Standard & Poor’s downgraded the credit in April. Analyst Suzie Desai wrote in a recent report: “If Provena completes its planned series 2009B refinancing … we assume management will be able to implement WellSpring’s plan and return the system to a stronger operating position.”

JPMorgan is underwriter, Kaufman Hall & Associates is financial adviser and Jones Day is bond counsel. Kaufman Hall’s Kenneth Kaufman said growing market tolerance for risk has created an opening for the BBB credit. “We are seeing BBB credits find buyers. A few months ago these credits would not have had a prayer,” he said.

The University of Chicago Medical Center in a sale this summer will raise funds to reimburse itself for capital expenditures and to finance costs related to construction of its new pavilion. The hospital is rated Aa3 by Moody’s and AA-minus by Standard & Poor’s. It has selected JPMorgan as the senior manager, Barclays Capital as co-senior manager, and Cabrera Capital Markets and Loop Capital Markets as co-managers. Jones Day is bond counsel.

Chicago-based Rush University this summer will sell up to $210 million to raise funds for its various capital programs. The system has a $1 billion capital transformation project that calls for the reconstruction of 100-year-old buildings, new parking structures, a new tower and emergency room and power plant. The projects are broken into four phases to be completed through fiscal 2016.

Structural details are not yet final. The system is rated in the low, single-A category by all three rating agencies. Morgan Stanley, Cabrera and Loop are underwriters and Jones Day is bond counsel.

This summer, Winfield-based Central DuPage is planning to refund about $100 million of debt and raise $49 million of new money for various projects in the fixed-rate transaction. The hospital is rated AA by Fitch Ratings and Standard & Poor’s. Morgan Stanley is the underwriter and Jones Day is bond counsel.

The hospital received state regulatory approval in 2007 to build a new five-story bed pavilion and a parking garage. The hospital is also the sponsor of a state-of-the-art Proton Center in Warrenville. The $290 million facility, which would offer targeted radiation treatment for some cancers, is under construction. Only about five exist in the country but a handful of new facilities are also being built or are under consideration.

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