State Treasurer Bill Lockyer announced the California Health Facilities Financing Authority (CHFFA), which he chairs, approved on Tuesday the sale of $1.9 billion of bonds to help Kaiser Foundation Hospitals build six new hospitals, expand a current one, and construct a specialty medical office.
The transaction is the largest ever approved by CHFFA.
The new construction is needed to help Kaiser meet California's seismic safety regulations, state officials said.
"We're pleased to help Kaiser finance projects that will help improve the delivery of health care for millions of their patients throughout California," said Lockyer. "This deal will also help residents in underserved communities."
Kaiser will use $1.8 billion for the construction projects. The remaining $100 million will be used to refund 2012 commercial paper issued to refund Kaiser's 2002A series bonds.
Goldman, Sachs & Co. is lead manager on the deal expected to receive A-plus ratings from Fitch Ratings and Standard & Poor's.
The tax-exempt bond financing will help Kaiser build new hospitals to replace the following facilities: Oakland Medical Center, Hayward Medical Center, Redwood City Medical center, South Bay Medical Center in Harbor City, Fontana Medical Center and Anaheim Medical Center.
Other large transactions handled by the conduit issuer include $1.2 billion for Dignity Health in 2009 and $756 million for Sutter Health approved in 2007.
The conduit issuer is in no danger of exceeding its capacity to issue future bonds because of this transaction, according to Bill Ainsworth, a spokesman for the treasurer's office.
"CHFFA's capacity to issue bonds depends on the market and whether investors are willing to purchase bonds," Ainsworth said.
In recent years, CHFFA has taken a number of steps to make it easier for borrowers to apply to sell bonds through CHFFA. They have reduced the application from 35 to two pages, standardized bond documents to make it easier to apply and adopted an easier to understand process for evaluating transactions, he said.
Unlike any other issuer in the state, CHFFA uses fee revenues not needed to cover its operational costs to provide low-cost loans and grants to small and rural clinics so they can build facilities, buy equipment and expand access to care, Lockyer said.
"This deal shows how CHFFA's strong commitment to offering borrowers a streamlined application process focused on creditworthiness is paying off," Lockyer said.
Kaiser has $7.7 billion in outstanding debt.