DALLAS — Baylor Health Care System recently unveiled plans to build a $350 million cancer hospital and cancer outpatient center at its main campus in downtown Dallas.

BHCS officials said they hope to raise about $40 million through philanthropic donations, using cash and possibly health care facility bonds to fund the rest.

The  450,000-square-foot center is slated to open in 2011, while construction of the 120-bed hospital will being in 2010.

“When completed in 2013, it will be our goal to be a nationally and internationally renowned cancer care destination, building on Baylor Dallas’ commitment to providing advanced cancer treatments and leading the charge of improvement in cancer care through research,” Joel Allison, president of system, said in a release.

The North Central Texas Health Facilities Development Corp. issues debt on behalf of BHCS.

Allen Clemson, administrator for the conduit issuer, said the Baylor system hasn’t applied to issue debt again, but added that doesn’t mean it won’t.  The health facilities development corporation sold bonds in 2004 and 2006 for the system, which used proceeds to build new facilities and update existing hospitals.

BHCS ended fiscal 2007 with $1.2 billion of cash and unrestricted investments, according to Standard & Poor’s, which rates the system’s credit at AA-minus.

The faith-based, nonprofit health care system provides services through 15 owned, leased or affiliated hospitals, and surgical services at six short-stay hospitals across North Texas.

If the system decides to tap the debt market, exact timing of the issuance remains unclear.

One bond lawyer in Dallas said “everyone’s pulling deals right now waiting for the market to regain some sort of normalcy.”

He advised one heath care industry client that has a nearly $400 million issue ready to go to wait until things calm down.

“It’s just crazy right now. Everyone is waiting to see if there’s any more shoes left to drop, waiting to see what the Fed is going to do … what Congress will do, and just in wait-and-see mode. There’s not much else to do,” the lawyer said.

In December, Moody’s Investors Service upgraded its rating on BHCS to Aa2 from Aa3, citing continued financial improvements for several years that have led to increased market share in the highly competitive Dallas-Fort Worth area. The increased market position is due to the success the system had implementing its significant capital plan, according to Moody’s.

Analysts also revised the outlook on the credit to stable at the higher rating from positive at the lower rating. The system has about $831 million of long-term debt outstanding,.

Standard & Poor’s analysts said one factor precluding a higher rating is Baylor’s “aggressive capital plan of about $2 billion through 2012.”

Officials anticipate building a new hospital around McKinney while expanding and renovating existing facilities and searching for potential new hospital sites to deal with growth in the area. In late 2004, the Baylor system opened a new hospital in Plano, which is already working at capacity.

Some of the fastest growing areas of the country are in North Texas.

The Dallas-Fort Worth metroplex added 842,449 new residents between 2000 and 2006, according to the Census Bureau, which said most of the growth is attributable to increased domestic migration.

Fulbright & Jaworski LLP serves as bond counsel to the health system.

 

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