Adventist Health will come to market Wednesday with $970 million in taxable and California tax-exempt debt, largely to refinance direct placement debt into the public markets.
It will follow with $61 million in Oregon tax exempt debt Oct. 30.
Bond proceeds will provide funding to restructure approximately $788 million in existing direct placement debt and a line of credit draw, according to Fitch Ratings, which affirmed its A-plus rating ahead of the deal. S&P Global Ratings affirmed its A rating.
The transactions will refund $145 million of publicly issued outstanding debt, according to Fitch, and remarket as public put bonds two California series of debt previously issued as unrated direct placements. Those are $55.2 million through the California Statewide Communities Development Authority and $105.4 million through the California Health Facilities Financing Authority.
The health system will also issue $75 million in new money for general corporate purposes.
The hospital system has weathered the closure of its hospital in Paradise, California, after the 2018 wildfire that devastated the town. It also signed a lease agreement last year to run the bankrupt Tulare Hospital in central California and is negotiating with St. Joseph Health, which merged with Providence Health and Services, to establish a joint operating agreement for each hospital system's northern California hospitals.
Adventist has inpatient facilities in three states, California, Oregon and Hawaii, and one retirement center in Washington. It operates 20 hospitals with the vast majority located in California and had total revenues of just over $4.4 billion in fiscal 2018.
The finance team held a live question and answer call Monday in which hospital executives fielded questions ahead of the sale about the Paradise hospital, acquisitions and joint ventures.
The 100-bed Feather River Hospital in Paradise suffered severe damage during the Camp Fire. The health system announced in February the earliest it would reopen the hospital was in 2020.
The medical clinic operated by Adventist in Paradise reopened in December and is seeing about 70% of the traffic it had before the fire, Bill Wing, president of Adventist Health, said on the call.
“From there, we are evaluating urgent care services,” Wing said. “As the community does return, we will look to add other services in alignment with those needs. But that community will likely not recover to its full extent.”
Wing didn’t say unequivocally whether the hospital would re-open, but said Adventist will continue to try to meet the needs of the community to the extent it does recover. The hospital has multiple streams of insurance to cover losses from the Camp Fire, including property, equipment and business continuity, Wing said.
“We are working through everything with the insurance adjusters and expect to see funds flow in every next year, other than what we already got to cover labor post fire,” Wing said.
As for the St. Joseph’s joint operating agreement, Wing said he expects to hear from the Federal Trade Commission in November, but the deal also has to be approved by the California Attorney General’s office. He suspects the earliest the deal could be completed would be early next year.
RBC Capital Markets and JP Morgan, lead managers on the taxables, will price $810 million in taxable debt Wednesday. Ziegler is lead manager on the tax-exempt debt, including a current refunding of $61.4 million in tax-exempt debt issued through the Hospital Facilities Authority of Multnomah County, Oregon, on Oct. 30.
