CommonSpirit Health’s $6.5 billion financing wins Deal of the Year

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CommonSpirit Health won The Bond Buyer’s 18th annual Deal of the Year award for its $6.5 billion financing, the largest ever by a not-for-profit health system.

The deal consisted of both a complex restructuring of nearly 50 series of debt and new money reimbursement. It generated the largest order book for a municipal not-for-profit transaction, with $40 billion in orders.

“This year, our editorial board selected a deal that checks all the boxes we consider when evaluating these transactions,” said Mike Scarchilli, Editor in Chief of The Bond Buyer at the Dec. 4 gala. “It’s part tax-exempt, part taxable. It generated significant international interest. It involves multiple issuers and created a new credit. It’s a monstrous, complex deal that required a large deal team to come to fruition, leveraging expertise across a multitude of disciplines. And just as importantly, it served to advance the public good in a meaningful way.”

Citi and JPMorgan were co-senior managers on the financing. Swap Financial and Kaufman Hall were financial advisors. Assured Guaranty wrapped a portion of the deal with bond insurance.

In February 2019, Dignity Health and Catholic Health Initiatives merged to form CommonSpirit Health, the nation’s largest not-for-profit health system by acute care revenue. The combined system includes 142 hospitals and more than 700 care centers across 21 states, serving more than 20 million patients annually, with revenue of $30 billion.

To create a stable, flexible financial platform, CommonSpirit Health management and treasury teams created a new, on-market Master Trust Indenture to govern capital structure, executed a $1.2 billion bridge loan to preserve acquisition financing treatment, and developed an effective investor marketing strategy that began more than four months before the deal.

The Bond Buyer’s editorial board considered a range of factors when judging entries, including: creativity, the ability to pull a complex transaction together under challenging conditions, the ability to serve as a model for other financings, and the public purpose for which a deal’s proceeds were used. The 2019 awards, which were distributed at a ceremony at the Conrad New York Downtown in Manhattan, drew nominations that represent the diverse range of communities and public purposes served by the municipal finance market.

The ceremony also included the presentation of the Freda Johnson Awards for Trailblazing Women in Public Finance. This year’s honorees were public finance professional Ritta McLaughlin, most recently the MSRB's Chief Education Officer, and Courtney Shea, owner and managing member of Columbia Capital Management LLC.

The other Deal of the Year finalists were:

INNOVATIVE
The first recipient of the Innovative award is the Cities of Dallas and Fort Worth, Texas’ nearly $1.2 billion taxable refinancing. DFW’s plan to discontinue issuing alternative minimum tax bonds and focus entirely on taxable debt resulted in the largest ever taxable airport deal and international orders totaling 39% of the deal size.

ESG/GREEN FINANCING
The inaugural winner in the ESG/Green category is the Los Angeles County Metropolitan Transportation Authority’s $545 million offering of Proposition C sales tax revenue bonds, which included $418.5 million second-party-verified green bonds. The transportation issuance was the second largest green deal in 2019, and the second largest green offering in California history.

PUBLIC-PRIVATE PARTNERSHIP FINANCING
The first-ever honoree in the P3 category is Transurban’s 95 Express Lanes for $262 million of Senior Lien Revenue Bonds, issued by the Virginia Small Business Financing Authority, to fund its 10-mile Fredericksburg Extension project.

SMALL ISSUER FINANCING
The Vermont Municipal Bond Bank is the Small Issuer honoree for its $31.5 million issuance of Local Investment Bonds. The designation serves a two-fold purpose: raising awareness of the social and environmental impacts of the projects the Bond Bank funds, and making access to those investments more widely available through $1,000 denominations.

NORTHEAST REGION
The Battery Park City Authority claimed the Northeast crown for its $673 million offering for resilience projects in a neighborhood devastated by Superstorm Sandy in 2012. The complex financing saw the authority issue variable-rate demand bonds and SIFMA floating-rate notes for the first time. The transaction also received a second-party sustainability bond designation.

MIDWEST REGION
The Indianapolis Local Public Improvement Bond Bank is the winner in the Midwest for its $625 million issuance of bonds secured by lease rental payments for its Community Justice Campus. The design consolidates operations and replaces the current outdated, overcrowded, and unsafe facilities with three new, modernized buildings on a single campus.

SOUTHWEST REGION
The Southwest recipient is the City of Austin’s $464.5 million offering of taxable revenue bonds to fund its acquisition of a biomass-fired power plant for the city’s electric utility. The transaction created a clear path to eliminate an above-market power purchase agreement, a source of considerable cost and frustration for the city and Austin Energy.

SOUTHEAST REGION
The Solid Waste Authority of Palm Beach County, Florida, wins the Southeast for a $347.6 million refunding utilizing "Cinderella bonds," which employ a crossover taxable and tax-exempt convertible refunding bond structure. This creative approach allowed the issuer to solve a problem it otherwise couldn’t have after the elimination of tax-exempt advance refunding.

FAR WEST REGION
The San Diego Association of Governments’ $331 million capital grants receipts revenue bond sale is the honoree in the Far West. The first public market, stand-alone securitization of a federal full-funding grant agreement in nearly 20 years, the deal accelerated the completion of the city’s $2.2 billion Mid-Coast Corridor Transit Project.

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CommonSpirit Deal of the Year
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