LOS ANGELES — Now that private activity bonds have survived the tax reform gauntlet, deals are coming off the table.

Two of three California hospital systems that were planning to issue bonds in December through a treasurer’s conduit decided not to.

Providence Health & Services withdrew before seeking final approval for a bond deal from the California Health Facilities Financing Authority and Kaiser Permanente confirmed Thursday that it won't bring to market in December $2.2 billion of tax-exempt bonds CHFFA approved Dec. 7.

Ronald Washington, executive director of the California Health Facilities Financing Authority, in 2017.
Ronald Washington

A Kaiser spokeswoman would not comment on whether Congress’ decision to preserve private activity bonds played a part in the decision not to move forward on the sale. Plans to sell in December had been triggered by the House version of the GOP tax bill, which would have ended PABs, wiping out tax-exempt bonds for nonprofit organizations.

December has typically been a quiet month for CHFFA. Last year it priced $270.1 million in December, and before that nothing in each year back to 2012, according to Thomson Reuters data.

The conduit issuer was anticipating its biggest December in recent history thanks to the now unrealized-threat to PABs. With a $460 million Stanford Healthcare pricing Tuesday it still topped recent history – but not at the level anticipated.

The hospital conduit and the California Educational Facilities Authority, both headed by Ronald Washington, were busy with the threat to PABs.

“Not just in healthcare, but also in education. In both instances, there was a rush to get them done and closed in December,” said Washington, who was promoted to executive director of CHFFA from deputy director on Monday.

Since 2007, CHFFA has issued roughly $20.21 billion of bonds, with the most issuance before this year occurring in 2016 when it sold $3.21 billion.

Neither Stanford Healthcare, Providence nor Kaiser originally planned to sell bonds in December.

Kaiser had received prior approval March 23 from the conduit issuer’s board to price $4.4 billion. Goldman, Sachs & Co. was lead on a syndicate that sold $2.1 billion in tax-exempt bonds for Kaiser in April. Kaiser received The Bond Buyer's Deal of the Year award for a $4.2 billion sale that included $2.1 billion in taxable bonds sold directly by the hospital foundation.

Kaiser came back to the CHFFA board on Dec. 7 with a supplement adding 17 projects for approval so the hospital could issue the remaining $2.2 billion approved by the board in March, Washington said.

“Kaiser was authorized to sell $4.4 billion through the conduit issuer, but the [total issuance] generally occurs over a number of years,” Washington said.

Approving that amount allows them to not have to come to the board every time they want to issue bonds, Washington said. “It wouldn’t be unusual if it took them two years to issue all of it,” he said.

The projects added to the list had not received environmental approvals in March.

“These are projects they are intending to sell bonds for at some point,” Washington said. “When they get enough projects to the point they are ready to sell bonds, they add projects to the list. They had enough projects far enough along in March to sell $2.1 billion.”

Kaiser had yet to post preliminary offering documents, and nothing had posted on the bond sale calendar for December.

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