CHICAGO — The Illinois Finance Authority board this week approved Novi, Mich.-based Trinity Health Corp.’s issue of up to $600 million tied to its acquisition of Loyola University Health System in suburban Chicago, and advanced a Midwestern disaster area revenue bond issue for Cargill Inc.

Cargill received preliminary approval for its sale of up to $18.7 million of bonds under the federal Midwest Disaster Area program.

The nearly 150-year-old, privately held processor and marketer of agricultural and food products employs 130,000 in 63 countries.

The company would use bond proceeds to finance various projects at three Illinois facilities. They include the construction of a 300,000-bushel grain elevator equipped with concrete bins, a 1,000-bushel unloading pit, a dryer, and a barge shipping belt to  replace current capacity at its facility in New Boston. Proceeds would also finance upgrades to its facility in Paris and rail-related improvements, including a connection to the CSX railroad at its facility in Tuscola.

The bonds would be a general unsecured corporate obligation of the company, which carries underlying ratings in the mid-single-A category from Moody’s Investors Service and Standard & Poor’s. The bonds would be on par with the company’s other outstanding private-activity debt.

The company is considering a multi-modal structure. Thornton Farish Inc. is underwriter and Kutak Rock LLP is bond counsel.

The disaster area bond program permits the use of tax-exempt bonding for qualified privately owned projects aimed at generating jobs and economic activity in designated Midwestern counties, including 18 in Illinois that saw severe weather-related damage in 2008. The bonds must be sold by the end of 2012.

Trinity, which operates 46 acute-care hospitals and other health care facilities in nine states, anticipates a fall sale with a mid- to late October closing. Trinity would use most of the proceeds of the transaction to refinance $350 million of commercial paper used to defease Loyola’s total bonded debt, reimburse itself up to $175 million for the cash cost of acquiring Loyola, and raise $19.5 million to fund working capital for Loyola’s facilities.

The facilities include its main campus in Maywood and Loyola Gottlieb Memorial Hospital in Melrose Park. The system closed on its acquisition of Loyola in June.

Trinity’s facilities generated more than $7 billion in revenue in fiscal 2010 and it carries over $3 billion in cash and assets. Its debt totals $2.7 billion and the system is in the midst of a $2.4 billion capital campaign. It is contemplating a financing that uses both fixed-rate and variable-rate bonds, depending on market conditions, and may include a piece that is privately placed.

The sophisticated system is also eyeing alternative variable-rate products such as floating-rate notes and window variable-rate demand bonds. “There may be multiple series of bonds issued, depending on the structure,” IFA documents said.

Any publicly issued floating-rate bonds would be backed by Trinity’s self-liquidity and a $916 million dedicated revolving credit agreement or a bank facility or letter of credit. Any alternative variable-rate products not requiring liquidity and fixed-rate bonds would carry Trinity’s underlying ratings in the mid-double-A category from all three agencies.

Goldman, Sachs & Co., Bank of America Merrill Lynch, Loop Capital Markets LLC, and Cabrera Capital Markets LLC make up the underwriting team. Kaufman Hall & Associates is financial advisor and Hawkins Delafield & Wood LLP is bond counsel.

The Trinity marriage helped Loyola University win an upgrade from Moody’s as the sale of what was previously a wholly owned subsidiary of the school removed a strain on its balance sheet. Loyola had provided operational and liquidity support to avoid a covenant default. The university will continue to operate the Stritch School of Medicine.

Under the deal, Loyola committed to covering half of the cost of a $150 million medical research building on its medical school campus. As part of the sale, Loyola received $80 million of up-front funds and $20 million in escrow that will be released over four years. LUHS will pay academic support payments of $22.5 million per year to LUC for an initial 10-year period.

The Catholic-sponsored Trinity operates facilities in California, Idaho, Illinois, Indiana, Iowa, Maryland, Michigan, Ohio, and Oregon. LUHS previously carried a low investment-grade rating. Its hospitals and other health care facilities generated $1 billion of revenue in fiscal 2010.

Trinity reported providing $456 million of community benefits in fiscal 2010, a line item on hospital balance sheets that has come under heightened scrutiny in Illinois as the state Department of Revenue has moved to deny property tax exemptions for some hospitals over the level of their charitable and community benefits.

Trinity is also now in talks with Chicago-based Mercy Hospital over some form of a union, according to published reports.

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