DALLAS -- Michigan-based Trinity Health Credit Group is coming to market with a roughly $1 billion bond offering that will be sold ahead of its original schedule because of the House GOP tax bill that could end its ability to issue tax-exempt debt after Dec. 31.

The group plans to sell the bonds Wednesday.

“Given the uncertainty around potential tax reform, specifically as it relates to the elimination of private activity bonds and advanced refundings, we believe it is in our best interest to accelerate our bond offering and to come to market ahead of schedule," the group said in an emailed statement.

The bill that cleared the House would eliminate tax-exempt advance refundings and private activity bonds for housing, private universities, not-for-profit hospitals, and other development projects after Dec. 31. The Senate Republican proposal preserves PABs but still puts advance refundings on the chopping block. GOP leaders are aiming for reconciliation between the two in mid-December.

MacNeal Hospital, Trinity Health, Loyola, Berwyn, Illinois
Part of the procceds of Trinity's $1 billion bond offering will reimburse the group the purchase price of MacNeal hospital in Chicago.

Trinity’s offering will include both tax-exempt and taxable bonds.

Bank of America Merrill Lynch is senior manager on $900 million of tax-exempt bonds next Wednesday. Roughly $775 million will be offered through the Michigan Finance Authority, $43 million will be issued through the Idaho Health Facilities Authority and $75 million will be issued via the Franklin County, Ohio.

Additionally there will be a conversion of approximately $300 million of variable-rate bonds to fixed rate through a remarketing. The bonds will be largely in Michigan and also a smaller portion in Pennsylvania. The use of proceeds will include reimbursement and future capital financing of a portion of the purchase price of MacNeal hospital in Chicago, a transaction that will close next year.

Roughly $500 million of the tax-exempt bonds are refundings, according to Jeff Newhams, managing director of Bank of America Merrill Lynch. “It is important to note that these refundings are rate sensitive and will be subject to completion based upon meeting minimum saving perimeters,” Newhams said in an investor presentation. The group said it is anticipating about $45 million in present value savings.

The taxable offer will be led by Goldman Sachs. There will be two components: a $60 million new issue with multiple maturities and an additional $70 million of bonds that will be issued under a reopening of the 2015 taxable CUSIP that will make the bonds index eligible because of the original $350 million size of the 2015 issue, according to Newhams.

The proceeds of the taxable issue will be used to refund certain bonds and will also be used to refund the purchase of MacNeal Hospital.

The financial advisor on the bond offering is Melio & Co. and bond counsel is Hawkins Delafield & Wood. Moody’s Investor Service affirmed its Aa3 rating on the bonds ahead of the sale.

Trinity has operations in 22 states, with over 90 hospitals and over 5,000 employed physicians. The group is purchasing MacNeal Hospital in Chicago and a related physician group. MacNeal is located near Trinity’s Loyola Medicine teaching hospital, which should help Trinity improve market share and rationalize some services in that market.

Financial performance improved in fiscal 2017 with an operating cash flow margin of 7.2% compared to 7.0% the prior year. Moody’s said that the group continues to increase margins through the first quarter of fiscal 2018, with an operating cash flow margin of approximately 7.6%.

S&P Global Ratings and Fitch Ratings affirmed their AA-minus ratings on the bonds.

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