LOS ANGELES — Loma Linda University received a one-notch downgrade to Baa1 from Moody's Investors Service ahead of plans to price $179 million in revenue bonds next week.
California Educational Facilities Authority, a conduit issuer, plans to price $140 million in tax-exempt revenue bonds and $39 million in taxable revenue bonds with final maturities in 2047 on Feb. 23.
The nonprofit religious health sciences university was founded in 1905 by the Seventh-Day Adventist Church, and continues to be part of the church's higher education system with its main campus in Loma Linda, 60 miles from Los Angeles.Moody's cited the substantial additional leverage for major capital projects that represent continued execution risk through fiscal year 2020 in the Feb. 8 downgrade. Analysts also noted "increased strategic overlap and capital support to the highly leveraged Loma Linda University Medical Center."The university is part of a larger umbrella organization, Loma Linda University Health, which includes the Loma Linda University Medical Center and its affiliates and the university clinical faculty corporation.The Medical Center, which carries junk ratings of BB and BB-plus from S&P Global and Fitch Ratings, respectively, has been working on a campus transformation project to meet earthquake safety requirements that are supposed to be completed by Jan. 1, 2020 under state law.Moody's assigns the university's bonds a stable outlook. The downgrade from A3 on the university's bonds also impacts $26 million outstanding Series 2007 bonds that will be refunded with the Series 2017 issuance.S&P Global Ratings assigned an A rating and stable outlook to the bonds Feb. 6.The finance team includes Citi as senior manager; PFM Financial Advisors LLC as borrower's financial advisor, and Fieldman, Rolapp, & Associates, Inc. as issuer's financial advisor. Legal counsel is provided by Orrick Herrington & Sutcliffe, as bond counsel; DLA Piper LLP, as borrower's counsel; and Squire Patton Boggs as underwriter's counsel.The proceeds will be used to fund upgrades and expansion to Loma Linda's Central Utilities Plant, refinance loans used to finance the acquisition and construction of educational facilities on the Loma Linda campus and the San Manuel Gateway College, a teaching medical facility on its satellite San Bernardino campus, and pay issuance costs.Net present value savings of $3.5 million is anticipated on the refunding of the Series 2007 bonds, according to the conduit issuer's report.
