OhioHealth system's bonds up next week

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Columbus, Ohio-headquartered OhioHealth will price $250 million of new money bonds next week to help finance the costs of improvements to its facilities around the state.

Franklin County will issue the bonds on behalf of OhioHealth. About $125 million of the new money are expected to be fixed-rate, $50 million will be issued as floating-rate notes, and $75 million are structured as variable-rate demand bonds supported by the system’s liquidity. The fixed-rate bonds and floating-rate notes are expected to price next Wednesday.

In addition, OhioHealth’s Series 2011B Mandatory Tender Bonds totaling $61.14 million will be rolled over at the same time as the new money financing, according to OhioHealth's treasury vice president Jeffrey Alexander.

Barclays and Citi are co-senior managers with Kaufman Hall as financial advisor.

Moody’s Investor Service affirmed its Aa2 rating on the bonds. The outlook is stable. Fitch Ratings affirmed its AA-plus rating. The outlook is stable. S&P Global Ratings rates the bonds AA-plus. The system has about $1 billion in long-term debt outstanding.

"The AA+ rating reflects OhioHealth's exceptionally strong credit profile including liquidity, profitability and leverage metrics in addition to a broad operating platform and a leading market position," Fitch said.

Proceeds will help finance a new corporate administration building that is under construction in Columbus, plans to convert rooms at Marion General Hospital to private rooms, and projects to bring in newer technologies at other facilities.

"Our objective is to provide right level of care as close to the patient as possible,” said Alexander. “Rather than building one large, new hospital or new tower, there are a number of smaller projects that will help execute our strategy.”

OhioHealth has spent $163 million over the past four years in Richland County on facility construction and improvements, including construction of a medical office building and a parking garage and other hospital improvements on the Mansfield campus. Another $60 million was spent during the period on more routine capital projects such as an MRI machine and renovations to the nursing unit. The system plans to finish $9 million worth of projects this year.

The system operates 10 hospitals and one joint venture rehabilitation hospital. It plans to open its 11th hospital in October with the addition of a small 26-bed surgical hospital in Grove City.

OhioHealth is currently in merger talks with Berger Health System, a single-hospital system based in Circleville. If the deal comes to fruition, Berger would become the 12th hospital in OhioHealth's system.

The system also includes one managed hospital, two affiliated hospitals and one strategic-partner hospital. Additional operations include over 60 ambulatory sites, a medical group with over 1,000 employed physicians and advanced practice providers, home health services and an ownership interest in a physician hospital organization that operates a clinically integrated managed care network.

"OhioHealth has continued to expand its regional presence through hospital affiliations as well as clinical support and networks, contributing to its 29% leading market position in the broader 47 county service area,” said Fitch.

The system’s total consolidated operating revenues exceeded $4 billion in fiscal 2018.

The system’s senior leadership is undergoing major overhaul with both the chief executive officer Dave Blom and chief operating officer Bob Millen having announced their plans to retire over the next one and two years, respectively. Moody’s said that it expects a smooth transition. Dr. Stephen Markovich, who oversees acute care operations, will replace Blom.

“The successor CEO has already been identified, has been at the system for 25 years, and is transitioning into the role,” said Moody’s. “The CFO will be assuming an operating role within OhioHealth; the system will have an interim CFO while a permanent replacement is hired. OhioHealth will continue to benefit from a centrally managed and governed model, which has driven a long history of effectively executing strategies and meeting budgets.”

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