LOS ANGELES — Citigroup Global Markets Inc. scrapped the closing on $377.6 million in revenue and general obligation bonds it priced for El Camino Hospital in northern California after the U.S. Justice Department subpoenaed documents from the hospital.
In a statement released Monday, Citi said it made the decision not to close on the financing "in connection with uncertainties" related to the event described in a Nov. 10 supplement to the Oct. 27 official statement.
The supplement stated that the hospital, a nonprofit public benefit corporation, received a subpoena for documents issued by the U.S. Department of Justice under 18 USC section 3486 in furtherance of a criminal investigation. The subpoena requested documents "with respect to the financial relationship between the Corporation and certain medical groups," according to the supplement.
The decision affected two different bond sales that priced Oct. 26-27, a $282 million revenue bond priced through conduit issuer, the California Health Facilities Financing Authority, and a $95.6 million general obligation bond refunding sold by the El Camino Healthcare District.
S&P Global Ratings and Moody's Investors Service rated the new money bond sale A-plus and A1 with stable outlooks ahead of the pricing.
El Camino Hospital is a nonprofit public benefit corporation of which the El Camino Healthcare District is the sole member. El Camino is a single hospital located on two Silicon Valley campuses in Mountain View and Los Gatos.
Citi was the underwriter on both sales. Ponder & Co. was financial advisor and Orrick was bond counsel. KNN Public Finance is CHFFA's financial advisor.
"The decision has been made to not close either financing," Citi's release said. "El Camino Hospital and El Camino Healthcare District will reassess the opportunity and timing to come back to the market."
The hospital has not been "informed of whether it is a target of the investigation and the government has not asserted any claims against the corporation," the supplement stated.
The U.S. Justice Department didn't return phone calls.
"We are not at liberty to release additional details related to the ongoing investigation," Iftikhar Hussain, chief financial officer of El Camino Hospital, said in an emailed response.
"Given uncertainties surrounding the subpoena and the general volatility of the fixed income market, we agree with the underwriter's decision not to close financing at this time and to reassess the opportunity and timing of coming back to the market," Hussain said.
The proceeds were to be used to construct and renovate several facilities at the Silicon Valley hospital in Mountain View. Among those are plans for a new behavioral health services building, a new medical office building, a new parking structure and expansion of a women's hospital building.
The capital projects will continue as planned, despite the postponement of the bond sale, Hussain said.
