CHICAGO — Illinois-based Advocate Health Care Network enters the market Thursday to raise nearly $100 million of new money for projects at three of its Chicago area hospitals.

The state's largest not-for-profit system is issuing the fixed-rate bonds through the Illinois Finance Authority which earlier this month authorized up to $300 million in new money and refunding. The extra borrowing space was sought to accommodate a plan to tender a piece of a newly acquired hospital's outstanding bonds.

"We decided not to tender Sherman Health System's 2007A bonds because of rising rates," said Advocate's chief financial officer, Dominic Nakis. "It was just not fiscally prudent anymore." The system previously tendered a piece of Sherman's callable debt. The Sherman Health obligated group, rated in the triple-B category, will remain intact as a result of the decision to leave the 2007 bonds outstanding.

JPMorgan is senior manager with Cabrera Capital Markets LLC and Loop Capital Markets LLC serving as co-managers. Jones Day is bond counsel. Kaufman Hall is advising Advocate.

Proceeds will finance an expansion of the intensive care unit at Advocate Trinity Hospital in Chicago, a modernization at Advocate Good Shepherd Hospital in suburban Barrington, and an expansion of the emergency and surgery departments at Advocate Lutheran General in suburban Park Ridge.

Ahead of the sale, all three rating agencies affirmed Advocate's mid-double-A ratings and stable outlooks.

The system operates 11 acute care hospitals and one children's hospital and a total of 250 service sites. It has grown in recent years through the steady acquisition of existing hospitals, the latest being Sherman Health which includes the 255-bed hospital in far northwest suburban Elgin. The acquisition closed on June 1.

Advocate has a total of $1.2 billion of debt and its facilities generated $4.6 billion in 2012. Advocate's unrestricted cash and investments total over $3.7 billion. The bonds are unsecured obligations of the obligated group.

Fitch said the rating is supported Advocate's low debt burden, strong operating cash flow generation with ample liquidity, and well-funded pensions.

The system benefits from a "strong and growing balance sheet position with 322 days of cash on hand at fiscal year end 2012, providing a strong 270% coverage of debt," Moody's Investors Service wrote.

Advocate enjoys a leading market share in the Chicago region and its recent acquisition of Sherman Health "should further bolster its market position," Fitch analysts wrote. Sherman generated $308 million of revenue in fiscal 2012. Advocate has committed to funding $200 million in capital and operating projects over a five-year period at Sherman which opened a replacement hospital in 2009.

Despite its position, intense competition in the Chicago region remains a credit challenge as does the regulatory and legislative environment in Illinois, including delays in Medicaid reimbursements which accounts for a limited 9% of net patient revenues, Fitch said.

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