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Yale-New Haven Hospital to Sell $232M

Yale-New Haven Hospital is scheduled to come to market Thursday with a $232 million sale of revenue bonds in three series. Barclays is lead manager.

The New Haven, Conn.-based nonprofit, 1,541-bed tertiary medical center will sell $132 million Series 2013 taxable bonds directly, and a further $100 million tax-exempt in two $50 million tranches — Series 2013N and O — through the Connecticut Health and Educational Facilities Authority.

Standard & Poor's revised its outlook on the debt to stable from negative while affirming its A-plus long-term rating for the new issuance. The rating agency also assigned its a AAA/A-1 plus dual rating to Series 2013O.

Moody's Investors Service rates the taxable bonds and Series N bonds Aa3, while assigning Aa1/VMIG1 to the Series O bonds. Proceeds from the latter will refinance a portion of an interim loan used to finance the Hospital of Saint Raphael merger.

"The outlook revision reflects our view of [Yale-New Haven's] continued strong patient volume growth and improved financial and operational performance, which has allowed it to absorb costs from the recent acquisition and operation of Saint Raphael's Hospital," said Standard & Poor's credit analyst Martin Arrick. The stable outlook, he added, also reflects the view that Yale-New Haven will successfully integrate Saint Raphael.

On Sept. 12, Yale-New Haven closed on its purchase of the Saint Raphael, culminating roughly two years of planning and regulatory approvals. The merger created the largest health-care facility in Connecticut and proceeds from the $160 million transaction enabled Saint Raphael to pay off its debt and help offset pension liabilities. The acquisition also allowed Yale-New Haven to sidestep an estimated $650 million investment in a new patient tower.

Arrick said the purchase should enable Yale-New Haven to avoid even larger capital expenditures in a few years for expansion costs it otherwise would have had to incur.

The purchase also included the Sister Anne Virginie Grimes Health Center, Saint Raphael's 120-bed skilled nursing and short-term rehabilitation facility.

Yale-New Haven also includes Smilow Cancer Hospital at Yale-New Haven, Yale-New Haven Children's Hospital and Yale-New Haven Psychiatric Hospital.

The ability of both parties to iron out a deal contrasts with a proposed hospital merger elsewhere in Connecticut that fizzled. Waterbury Hospital and St. Mary's Hospital called off their agreement in October when compliance with the Catholic hospital's stance on contraceptives became a roadblock. The following month, Waterbury Hospital announced a deal with Vanguard Health Systems Inc. of Nashville, Tenn.

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