CHICAGO — The Illinois Finance Authority board signed off on three new financings at its meeting Tuesday, including the first to take advantage of its new cross-border conduit issuance powers.
The IFA board approved Skokie-based Covenant Retirement Communities Inc.’s private placement of new-money and refunding bonds totaling up to $70 million. The system plans to refund debt sold in 1999, 2004, and 2006 and raise funds for capital projects.
With 14 retirement communities providing 4,668 units in eight states, CRC is one of the largest nonprofit senior living providers of market-rate housing in the nation, according to IFA documents. Its facilities located in California, Connecticut, Florida, Illinois, Michigan and Minnesota provide more than 3,100 independent units, 668 assisted-living units and 884 nursing care beds.
In Illinois, CRC operates facilities in suburban Chicago in Cook and DuPage Counties. “The capital projects include expenditures on three to five CRC campuses, including three in Illinois, that shall include the acquisition, construction, renovation, remodeling, and/or equipping of existing campus facilities,” according to IFA documents.
The deal marks the first to come before the IFA board to take advantage of the agency’s expanded issuance powers to include financing for projects proposed by organizations with Illinois ties but outside of state borders.
Gov. Pat Quinn signed the legislation last year. Supporters pushed it as needed to compete with other states with similar capabilities and the Wisconsin-based Public Finance Authority, which bills itself as a national conduit issuer.
The nonprofit will enter a private placement of the unrated floating-rate bonds with JPMorgan Chase& Co. The bonds are secured by a first mortgage on property and equipment and a gross revenue pledge.
The deal is expected to close early next month. Covenant’s existing debt has an underlying rating of BBB-plus from Fitch Ratings and BBB-minus from Standard & Poor’s.
Jones Day is bond counsel and the bank’s counsel is Katten Muchin Rosenman LLP. Ziegler Capital Markets is the placement agent.
Rush University Medical Center Obligated Group received final approval for its refunding next month of up to $60 million of debt issued in 1998 that will be purchased directly by JPMorgan Chase in a floating-rate mode. Killarney Advisors is financial advisor, Chapman and Cutler LLP is bond counsel, and Foley & Lardner LLP is bank counsel.
The bonds will not be rated. The system’s existing debt currently has underlying ratings of A-minus from Fitch and Standard & Poor’s and A2 from Moody’s Investors Service. S&P last month revised its outlook on Rush’s rating to positive in recognition of its operating performance and a reduction in construction risks as it nears completion on a new main patient tower.
The rating action affects more than $550 million of debt. Rush also has top-rated outstanding variable-rate bonds rated based on joint support from Rush and a letter of credit from Northern Trust Co. The new tower is scheduled to open early next year.
The rating is supported by Rush’s strength as an academic medical center with well-defined market recognition and broad clinical services. It has net patient revenues of $1.5 billion and debt service coverage of 4.2 times. Credit risks include managing the final costs for the new patient tower, a slowing of volume growth, exposure to state Medicaid pressures, and its close location to three other hospitals.
The Waterloo Community Unit School District received approval for up to $46 million of bonds, including new-money and an advance refunding of bonds sold in 2006. New-money proceeds of about $7 million will fund construction of school fire prevention and safety improvements in existing school buildings. Edward Jones is the underwriter and Chapman is bond counsel. The district has applied to Moody’s for a rating.
While issuance through the IFA has followed the national trend of slowing volume, the agency helped contribute to a national pickup in October during which the agency saw a 30.5% increase in new-money borrowing over the previous year.
“We are hopeful that the markets will continue to uptick, although it will be tough to match last fiscal year’s second-quarter volume, when recovery zone facility bond deals surged,” said IFA executive director Christopher Meister.
The IFA was among those that testified on Nov. 2 before congressional members, along with the Council of Development Finance Agencies, on the importance of preserving federally tax-exempt conduit bond financing.