CHICAGO — Illinois-based Hospital Sisters Services Inc. is gearing up to sell more than $400 million of new-money and refunding bonds this fall as it undertakes various upgrades to existing facilities and opens a replacement critical-access hospital.
The Illinois Finance Authority would serve as conduit issuer and the agency’s board gave preliminary approval to the issue at its meeting Tuesday.
HSSI intends to sell $160 million through a direct purchase with JPMorgan Chase Bank buying the bonds. Another $101 million of variable-rate bonds would carry a letter of credit from BMO Harris Bank and another $66 million would carry a LOC from BNY Mellon Bank.
The system would provide self-liquidity on another variable-rate tranche for $90 million, according to IFA documents.
Bank of America Merrill Lynch and BMO Capital Markets are the underwriters. Ponder & Co. is advising the system and Jones Day is bond counsel.
The deal would refund debt from 2003, 2007 and 2008, and raise new-money to finance the costs of acquiring, constructing, renovating, remodeling and equipping certain facilities.
The projects include construction of a 25-bed critical access replacement hospital in Highland with a $53 million price tag.
The system will spend $115 million on the renovation of a surgery department at St. John’s Hospital in Springfield and other upgrades, such as renovations of four floors in an existing tower to create private rooms with a $47 million price tag.
Hospitals Sisters Services Inc. operates 13 hospitals, eight in Illinois and five in Wisconsin that hold a market share ranging from 25% to 70% in their various markets. The system carries ratings of A1 from Moody’s Investors Service and AA-minus from Fitch Ratings and Standard & Poor’s.
“The new hospital will accommodate ambulatory services sized for future growth and expansion,” according to IFA documents.
The system is managed by the Roman Catholic Hospital Sisters of the Third Order of St. Francis, founded in Germany in 1844. The order established itself in the United States in 1875.
In a credit review earlier this year, Fitch said the system’s facilities generated total revenue of $2 billion in fiscal 2011.
The system benefits from strong liquidity and a light debt burden, while credit concerns include HSSI’s operations mid-sized markets with stagnant growth and revenue concentration at its flagship St. John’s facility in Springfield.
IFA executive director Christopher Meister told the board at its meeting Tuesday that the agency closed on 37 issues totaling almost $2 billion over the course of the fiscal year ending June 30.
The volume represents the lowest in the IFA’s history since it was established in 2004. The authority intends to diversify its product offerings in the coming year.
