CHICAGO — Indianapolis comes to market Tuesday with $42.6 million of double-A rated revenue bonds that mark the final piece of financing for a $734 million new safety-net hospital in downtown Indianapolis.
It's one of four deals the city is bringing to market over the next two months.
The finance team had planned to sell the debt in January, but delayed the borrowing to give investors time to digest a plan to partner with another large Indianapolis hospital system.
The agreement, announced in February, calls for a partnership between Wishard-Eskenazi, the only public hospital in Marion County, and Community Health Network, a single-A rated credit that is one of the area's largest providers. The partnership is not a full merger, and each system will maintain separate finances and responsibility for its own debt, officials said.
The move is aimed at helping the systems better prepare for the new federal health care law by expanding access in each other's markets, among other things.
"It's a very unique arrangement," said Gregory Clark, the deputy director and general counsel of the Indianapolis Local Public Improvement Bond Bank, which acts as the city's borrowing arm.
"We didn't want to go to market without full disclosure of the partnership agreement," Clark said. "We figured that, regardless of the market, we didn't feel it was appropriate to investors or to the credit ratings agencies to make this kind of announcement so close to doing a pricing."
The ratings agencies affirmed their ratings on Wishard ahead of the deal. Moody's Investors Service rates it Aa1 and Fitch Ratings maintains a AA rating.
Analysts said they base their ratings on the strong economy of the triple-A rated Indianapolis as well as the essential nature of the new facilities and strong support for the project signaled in 2009, when voters approved by an 85% margin a bond referendum authorizing the issuance of $703 million for the replacement facilities.
Proceeds from next week's bond issue will mark the final financing of the $734 million new Wishard project, which is on track to open by December. The project includes a 340-bed hospital that will replace the current Wishard hospital, as well as an ambulatory clinic, an office building, a parking garage and a power plant, all located in a medical complex in downtown Indianapolis.
"This is the final piece of a project that's been going for years," Clark said.
City Securities Corp. is the senior manager, with Drexel Hamilton and Fifth Third Securities rounding out the underwriting team. Barnes & Thornburg is bond counsel.
The debt includes roughly $24.3 million of serial bonds that mature from 2014 through 2032, $8.3 million of term bonds due in 2036 and $10 million of term bonds due in 2040.
The bonds are structured as lease revenue bonds. The Health and Hospital Corporation of Marion County will lease the facilities to the Indianapolis-Marion County Building Authority, which will then lease them back to the health and hospital corporation.
The lease payments are supported by an unlimited property tax pledge, and the payments will be used to service the debt-service payments. A piece of the proceeds will also be used to fund a debt-service reserve fund.
It's one of a handful of deals the bond bank has coming up the next few months. In mid-May the city plans to sell $60 million of debt that will include new money and $28 million of refunding bonds. The new money, roughly $14 million, will be used to finance upgrades to a technology park, and another $15 million will be used to refund 2012 bond anticipation notes into long-term debt for a parking structure. JPMorgan is the senior manager and Barnes & Thornburg is bond counsel. Clark said he has not yet hired the rest of the underwriting team.
A $38 million refunding of stormwater debt is set for late May, with Wells Fargo as the senior manager and Sycamore Advisors LLC as financial advisor.
The bond bank also plans to refund $15 million of general obligation bonds in June for savings. KeyBank Capital Markets is the underwriter on that deal.