DALLAS -- Oaklawn Hospital in Calhoun County, Michigan plans to convert its variable rate paper to fixed-rate debt in an upcoming $74 million hospital revenue bond refunding.

The series 2016 transaction consists of one series of debt totaling approximately $74 million. The debt is anticipated to be fixed-rate, tax-exempt and will refinance $63 million of outstanding variable rate debt. The bond sale will also include $10 million of new money.

In fiscal 2016, Oaklawn reported $72 million of outstanding debt, almost entirely comprised of variable-rate obligations.

"Oaklawn expects to achieve its objectives of avoiding possible upcoming balloon payments on its current debt instruments and eliminating risks associated with interest rate swaps," said Shelley Aronson at First River Advisory, the financial advisor on the transaction.

The bonds will be issued through the County of Calhoun Hospital Finance Authority.

The bonds are rated BBB-minus by Fitch Ratings and junk-level Ba1 by Moody's Investors Service. The outlooks are stable.

The bonds are expected to mature in 2047. Following the proposed 2016 issuance, total outstanding debt will be $80 million consisting of almost entirely fixed rate obligations.

The bonds are secured by a gross revenue pledge of the obligated group bolstered by an account control agreement, as well as a mortgage on the hospital site in Marshall, Michigan.

Barclays is the bookrunner. Cain Brothers and KeyBanc are the co-managers.

Oaklawn Hospital is a 94-licensed-bed independent hospital in Marshall, Michigan. The hospital, which opened in 1925, operates in a service area that include most of Calhoun County and extends into parts of Branch, Jackson and Eaton counties.

Oaklawn stands as one of 23 remaining independent systems within the state of Michigan. On Oct. 10 it became the only hospital in Calhoun County to be designated as one of the state's Level III trauma centers. A Level III Trauma Center has the ability to provide 24-hour immediate coverage by emergency medicine physicians and the prompt availability of a general surgeon, orthopedic surgeons and an operating-room team.

In fiscal 2016, Oaklawn reported a $2.4 million operating profit. The hospital's unrestricted cash and investments were $49.5 million and its operating cash flow in 2016 improved to $13.7 million from a five-year low of $7.3 million in 2014.


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