CHICAGO — The Indianapolis Local Public Improvement Bond Bank today will price $466.6 million of debt, marking the second piece of financing for a new $754 million public safety hospital in downtown Indianapolis.
Today’s $466.6 million sale includes $375.6 million of taxable direct-payment Build America Bonds and $91 million of tax-exempt bonds. The tax-exempts mature serially from 2013 through 2022. The BABs are two series of term bonds, one for $135 million maturing in 2030 and one for $241 million that matures in 2040.
The bond bank expects to capture an all-in interest rate of under 4% in today’s transaction, according to executive directer Kevin Taylor.
The first issue, which totaled $205 million and priced Feb. 3, captured a true interest rate of 3.83%.
“We were ecstatic with that,” said the bond bank’s deputy director and general counsel, Deron Kintner.
The first issue was made up of $40 million of traditional tax-exempt fixed-rate serial bonds and $165.2 million of taxable BABs. The 2022 maturity of the tax-exempts priced at 22 basis points above the Municipal Market Data scale, while the 2040 maturity of the BABs priced at 137.4 basis points over the 30-year Treasury on the day of pricing, according to Thomson Reuters. In trading midday Tuesday, a piece of the tax-exempt bonds that mature in 2022 was trading at 5%. The taxable BABs were trading in a range from 5.8% to 6%.
All the bonds issued for the project feature the full faith, credit, and taxing power of the Marion County Health and Hospital Corp., the county’s health care division, which has taxing power over an area that includes Indianapolis.
It was that unlimited general obligation pledge, bond bank officials said, that drove the first issue’s favorable pricing. All the tax-exempt debt in the first transaction was sold to retail buyers, Taylor said.
Citi is senior manager on both transactions. Barnes & Thornburg LLP and Graham & Associates PC are co-bond counsel. Crowe Horwath LLP is financial adviser.
The bonds in today’s sale are being issued by the bond bank on behalf of the Indianapolis-Marion County Building Authority, which is acting as a conduit for the Health and Hospital Corp.
The two sales are expected to complete most of the financing needed for the new Wishard Hospital, Marion County’s main public, acute-care hospital. The project is the culmination of years of planning by officials from both the hospital and Indianapolis to replace the existing Wishard, which includes some buildings that are nearly 100 years old.
In addition to the bonds, the hospital is expected to contribute $150 million in cash. Voters last November approved a total borrowing of $703 million. The bond bank may enter the market again in the future with the rest of the debt.
Moody’s Investors Service assigned a Aa2 to all the debt. Fitch Ratings gives today’s $66 million of debt AA while assigning a AA-plus to the first issue of $205 million. Fitch’s one-notch distinction on the debt comes as debt service on the Building Authority debt is subject to abatement if the facilities are not operational, analysts said.
Both agencies cited the unlimited property tax pledge backing the debt and the risks tied to Wishard’s role as a public hospital as key drivers of the ratings.
The new hospital is scheduled to open in December 2013.
