DALLAS - Arkansas Children's Hospital will finance more than half the cost of a $121 million expansion to its Little Rock facility with an upcoming negotiated sale of $100 million of revenue bonds by Pulaski County.
The bonds are supported by revenue from the private, 316-bed nonprofit medical center that covers 28 city blocks. Additional support is provided by a pledge from the Arkansas Children's Hospital Foundation.
The hospital is the only pediatric medical center in Arkansas and one of the largest in the United States. It serves as the pediatric teaching facility for the University of Arkansas for Medical Sciences.
Underwriters are Stephens Inc. and Merrill Lynch & Co. Bond counsel is Friday, Eldredge & Clark LLP.
The sale of the bonds is tentatively set for the first week of May, said Bobbie Nichols, senior vice president at Stephens.
The hospital had planned to issue the revenue bonds last November, but the sale was postponed due to poor market conditions.
"No health care bonds were going to market at that point," Nichols said. "Now we're very hopeful that there will be significant interest in this issue. Arkansas Children's Hospital is a strong credit."
Standard & Poor's has rated the 2009 bonds at A-plus, citing the hospital's strong market position as the only children's hospital in the state, a balance sheet that shows 259 days of cash on hand, and a favorable operating performance.
Moody's Investors Service rated the proposed 2008 issue at A1, but has not released a report on the current issue.
Bond insurance is being explored, Nichols said, but no decision has been made.
The sale would more than double Arkansas Children's Hospital's outstanding debt. As of June 30, 2008, it had $75.6 million of outstanding long-term debt from a $47 million revenue bond sale in 2002 and a $32.6 million issue in 2005.
Fiscal 2008 net patient revenues totaled $428 million. The hospital is also supported by revenue from a property tax approved by Pulaski County voters.
The four-story south wing expansion, which is currently under way, will result in a net addition of 54 hospital beds. The project will actually add 100 new patient rooms but the hospital will close a number of rooms, some of which were built more than 40 years ago.
Bond proceeds will provide about 52% of the cost of the expansion project, along with $37 million of utility infrastructure improvements on the main hospital campus to support the new construction as well as current campus operations.
Arkansas Children's Hospital served approximately 240 patients each day in fiscal 2008. The new south wing, which is expected to be operational by 2011, will allow the hospital to treat significantly more.
In addition to the new patient rooms, the facility also will include an expanded emergency department and a neonatal intensive care unit.
