Illinois OKs $875M for Health Care, Higher Ed

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CHICAGO — The Illinois Finance Authority board advanced up to $875 million worth of borrowing for health care and higher education organizations, including Ascension Health Alliance's sale of up to $600 million of new-money and refunding debt and $150 million from Loyola University of Chicago.

The IFA board gave final approval to Ascension's plans to refund up to $425 million of Alexian Brothers Health System bonds and other debt and to raise up to $175 million of new money to fund projects at the Alexian facilities.

St. Louis-based Ascension extended its national reach into the Chicago region with its Jan. 1 acquisition of the Arlington Heights, Ill.-based ABHS.

Alexian sought deeper pockets to address capital needs and manage through federal health care reform. Alexian was founded in 1866 and operates three Chicago-area hospitals and senior-living and other health care facilities in Missouri, Tennessee and Wisconsin that together generate $1 billion in annual revenue. Ascension acquired Alexian's roughly $450 million of single-A rated debt rated as part of the merger.

Ascension is the nation's largest nonprofit health care provider, with 68 acute-care hospitals and nine specialty hospitals operating in 20 states and the District of Columbia with more than 15,000 beds. The system generates $15.5 billion in annual operating revenue and has more than $4 billion of outstanding debt.

Kaufman Hall is Ascension's financial advisor while Citi and Morgan Stanley are serving as underwriters. Perkins Coie LLP is borrower's counsel and Orrick Herrington & Sutcliffe LLP is bond counsel. Ascension anticipates selling the bonds this spring.

"The Series 2012 bonds will be structured as a combination of fixed rate, put bonds, variable rate and Windows VRDBs," according to IFA documents.

Ascension carries ratings of AA-plus from Fitch Ratings and Standard & Poor's and Aa1 from Moody's Investors Service. New rating reports have not yet been released.

Ascension and California-based Daughters of Charity Health System last month announced the signing of a memorandum of understanding expected to lead to Daughters and its six hospitals joining Ascension.

Separately, last year Ascension formed Ascension Health Care Network — a joint venture partnership with the private-equity firm Oak Hill Capital Partners — to provide alternate funding for the acquisition of Catholic hospitals and other facilities.

"This agreement with Oak Hill Capital will provide an innovative solution for those hospitals to move forward with the resources and expertise they need to survive and thrive. In addition, they'll be able to maintain their Catholic identity," Ascension president Anthony R. Tersigni said in a statement at the time. The partnership last month announced it was in negotiations to buy Saint Clare's Health System in New Jersey from Catholic Health Initiatives.

The IFA board gave preliminary approval to Loyola University's plans to refund up to $50 million of debt from 2003 and 2004 and issue up to $100 million to fund various projects, including new student residence facilities and a new academic building. The bonds would be a general unsecured corporate obligation of the university. The actual size of the deal slated for a late spring or summer sale has not yet been determined, according to IFA documents.

"The university and their financing team will determine interest-rate modes and the mix of fixed-rate bonds and variable-rate bonds after evaluating market conditions," according to IFA documents. Morgan Stanley is serving as the senior manager with PNC Capital Markets as co-manager. Mickeni LLC's Ken Kerznar is financial advisor to Loyola with Jones Day serving as borrower's counsel and Chapman and Cutler LLP serving as bond counsel.

The university, which has an enrollment of 16,000, carries underlying ratings of A2 from Moody's and A from Standard & Poor's.

The university won a one-notch upgrade from Moody's last August after the sale of its hospital system to Trinity Health. S&P affirmed the university's rating. The school operates three campuses in the Chicago area and has another in Rome, Italy.

The IFA board gave final approval to Rockford Health System's $36 million current refunding of 1997 bonds. The system operates a 396-bed hospital in Rockford. BMO Harris Bank NA would directly purchase the bonds.

The authority also gave final approval to Northwestern Medical Faculty Foundation's refunding of up to $70 million of bonds. 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 and A1 from Moody's.

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