CHICAGO — The Illinois Finance Authority board on Tuesday advanced direct-purchase issues for two health care refunding deals and an $11 million allocation of Midwestern Disaster Area Bonds, the latest in a series of projects to tap the federal program before it expires at the end of the year.
The authority board gave final approval to P.O.B. Development LLC’s proposed $11.2 million issue of MDABs to finance construction of a three-story medical office building adjacent to existing medical office buildings that are part of Blessing Hospital’s campus in Quincy.
The bonds would be privately placed with Enterprise Bank & Trust and are projected to carry interest rates ranging from 3.5% to 4 %. The hospital is expected to serve as the primary user of the building and to eventually purchase it from the developer. Chapman and Cutler LLP is bond counsel and Stifel Nicolaus & Co. is serving as placement agent.
The IFA reported a pickup in recent months in applications seeking tax-exempt borrowing help through the MDAB program ahead of its expiration at the end of 2012. The program extends a tax exemption for debt that would otherwise be private-activity bonds for eligible projects in 18 state counties severely affected by storms and flooding in spring 2008.
The IFA — which administers the state’s allocation — has closed on two deals, one providing $20.2 million of assistance for an office building project in downtown Moline and another for $10 million to help finance a retail store in Gurnee. The agency has applications for another $170 million worth of projects in six towns but still has about $1.3 billion in remaining capacity from the original $1.5 billion authorization.
“Now is the time to identify and initiate discussions on prospective projects … we encourage economic development professionals, potential private sector borrowers, and commercial lenders to contact the authority for more information to see if MDABs are appropriate for their projects,” said executive director Christopher Meister.
The IFA board gave preliminary approval to Rockford Health System’s $40 million current refunding of 1997 bonds. The system operates a 396-bed hospital in Rockford, about 90 miles northwest of Chicago. The hospital is expected to pledge a secured interest in unrestricted receivables to repayment of the debt.
BMO Harris Bank NA would directly purchase the bonds. Hammond Hanlon Camp LLC is financial adviser and Jones Day is bond counsel.
The authority gave preliminary approval to Northwestern Medical Faculty Foundation’s refunding of up to $70 million of bonds from a 1998 series. The foundation is the academic faculty practice for full-time faculty of Northwestern University’s Feinberg School of Medicine.
The bonds will be directly purchased this spring by US Bank NA and will not be rated, but the foundation does carry existing ratings of A-plus from Fitch Ratings and A1 from Moody’s Investors Service. Kaufman Hall is financial adviser and Jones Day is bond counsel.
The health care refundings come as providers in Illinois are feeling squeezed on two fronts. Gov. Pat Quinn recently called for $2.7 billion in unspecified Medicaid cuts and ordered the state Department of Revenue to resume a crackdown on property-tax exemptions for hospitals based on their charity care levels. The state last year denied three hospital applications and another 23 are pending.
The hospitals apply for such exemptions to their local county board of review typically following a change in ownership or the use of property including new construction.
The dispute between hospitals and Illinois has focused on what counts towards charity care due to the lack of defined standards in existing state law.