Illinois Agency OKs Hospital Deals, Gets New Director

CHICAGO — The Illinois Finance Authority board this week advanced $400 million of health care financings, including Memorial Health System’s $150 million issue selling today, and hired a new executive director — the agency’s general counsel and deputy director, Christopher Meister.

Meister — who was recommended for the position by Gov. Pat Quinn’s office — joined the IFA two years ago after serving as the legislative director for the Illinois Department of Commerce and Economic Opportunity.

Meister has helped manage the agency on an interim basis since the departure of the agency’s former executive director, John Filan, who resigned in July under legislative pressure. Filan was the state’s former top fiscal officer and a deputy to indicted former Gov. Rod Blagojevich.

“Chris Meister has worked hard on behalf of Illinois farmers, businesses, hospitals and government to ensure that they have access to financing that helps create and retain jobs,” IFA board chairman William Brandt said.  “Chris’ strong economic development skills provide the leadership to increase access to capital markets at a time when our economy most needs the assistance IFA provides.”

Meister said his goal at the helm of the state’s largest conduit issuer was to continue “being innovative, aggressive and nimble with our various financial tools to help businesses of all sizes and types expand and create more and better jobs.”

The authority — created in 2004 to replace a handful of conduit agencies — last year was the top Midwestern issuer selling $4.6 billion of bonds in 76 deals and was second in 2007 selling $3.7 billion in 86 deals, according to Thomson Reuters.

The board also gave final approval to Memorial Health System’s $150 million fixed-rate issue selling today. Piper Jaffray & Co. and Morgan Stanley are underwriting the transaction. Ponder & Co. is financial adviser. Jones Day is bond counsel.

Ahead of the issue from MHS, Moody’s Investors Service assigned an initial rating of A1 to the bonds while Standard & Poor’s assigned it’s A-plus. The system has another $83 million of outstanding variable-rate letter of credit-supported debt but it does not carry underlying ratings.

“The rating reflects solid operations, good maximum annual debt service coverage, a good balance sheet, and a stable management team,” said Standard & Poor’s analyst Brian Williamson.

The system operates three hospitals in central Illinois: Memorial Medical Center in Springfield, Taylorville Memorial Hospital in Taylorville, and Abraham Lincoln Memorial Hospital in Lincoln. MMC is one of two primary teaching hospitals for Southern Illinois University.

Proceeds of the sale will finance projects that include a replacement hospital for Abraham Lincoln Memorial, construction of a new ambulatory service building at Taylorville Memorial , and the expansion of surgery capabilities and imaging services and construction of a new parking garage at MMC.

Moody’s said the hospital’s credit benefits from a seasoned management team with a track record for generating profitable returns, from its size and affiliations with SIU. It’s also a market leader in the nine county region it operates in with only one sizeable competitor, St. John’s Hospital in Springfield, and adequate liquidity and debt service ratios.

Its challenges include a doubling of its debt load and ambitious capital spending plans totaling $320 million between fiscal 2010 and 2014, and competition posed by St. John’s.

The system recorded income of $42.1 million for a 6.4% operating margin in fiscal 2009 and operating cash flow of $80.1 million. After the new issue, MHS’ debt service coverage ratio, based on 2009 results, will be 5.7 times. The median for an A1 credit is 5.2 times, Moody’s said.

The IFA board also gave preliminary approval to Swedish Covenant Hospital’s planned sale of up to $140 million of bonds to refund outstanding debt from 2003 and 2008 and provide new money for various renovation projects and equipment purchases.

The 323-bed hospital, founded in 1886 in Chicago by the Evangelical Covenant Church, would issue fixed-rate bonds early next month.

The hospital carries current ratings of A-minus from Fitch Ratings and BBB-plus from Standard & Poor’s. Bank of America Securities-Merrill Lynch and Ziegler Capital Markets Goup are underwriters, Ponder is financial adviser and Jones Day is bond counsel.

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Healthcare industry Illinois
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