Michigan-based McLaren Healthcare will sell a mix of $372 million of taxable and tax-exempt debt Tuesday with a big piece going to establish permanent financing for the acquisition of a health plan.

Proceeds from the taxable portion for $300 million will pay off interim financing used to finance McLaren’s acquisition of MDwise, a nonprofit HMO serving over 360,000 members in Indiana with annual revenue of $1.5 billion. The use does not qualify for tax-exempt financing.

The tax-exempt piece will refinance 2015 floating-rate notes due to an upcoming mandatory tender date. The notes will be structured as floating-rate and the spread is expected to be consistent with existing borrowing. The bonds mature Oct. 15, 2030.

The bonds carry ratings of AA-minus from Fitch Ratings and Aa3 from Moody’s Investors Service. The outlook is stable from Fitch and negative by Moody’s.

JPMorgan and PNC Capital Markets LLC are co- senior managers.

The taxable proceeds will refund a $250 million line of credit the system used to support the MDwise transaction that closed in January.

An additional $50 million from the taxable tranche will provide new money for general corporate purposes. Current capital plans include a $71 million major facilities improvement project at McLaren Macomb, a $175 million renovation project at McLaren Northern Michigan and a $47.5 million expansion of the Karmanos Cancer Institute's Weisberg Center in Farmington Hills, Michigan.

The $72 million of tax-exempt, floating-rate refunding bonds will be sold through the Michigan Finance Authority.

The bonds are secured by a security interest in the gross revenues of the members of the credit group. The credit group includes several medical centers and certain foundations. The credit group makes up 73.9% and 83.7% of system revenues and assets, respectively as of fiscal 2017.

The MDwise acquisition is McLaren's first outside Michigan. MDwise is a nonprofit HMO that had been jointly owned by Indiana University Health System and Health and Hospital Corp. of Marion County, a public health organization.

Combined, MDwise and McLaren Health Plan will collectively serve more than 620,000 individuals, making it one of the region's largest provider-sponsored health plans.

“McLaren reports that MDwise is currently unprofitable, and given the size of the plan, is expected to dilute McLaren's margins in the near term,” Moody’s said. “We expect over a longer horizon McLaren's core competency to successfully integrate and improve financial performance at acquired entities will result in improved performance at MDwise.”

Other acquisitions the hospital made this year include Michigan based Caro Medical Center and Huron Medical Center. Caro Medical Center is a critical access hospital with $14 million in annual revenue and Huron Medical Center is a community hospital with $42 million in annual revenue.

The healthcare system reported $3.8 billion in revenues in fiscal 2017 and includes 14 acute care hospitals, several outpatient sites, a physician practice plan, commercial and Medicaid health maintenance organizations serving both residents of Michigan and Indiana.

The system has nearly $1.1 billion of outstanding debt.

McLaren will file a certificate of need request later this year to build a new $450 million replacement hospital in Lansing, Michigan.

Fitch said the healthcare's capital plans are sizable and could include a new debt issuance associated with the Lansing project.

“Failure to successfully execute the capital projects or a material increase in debt could pressure the rating,” the rating agency said.

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