CHICAGO - Missouri-based BJC Health System priced $200 million of debt Thursday to finance various projects, including an expansion of its cancer center in St. Louis County in partnership with Washington University School of Medicine.
RBC Capital Markets served as senior manager. Ponder & Co. is the system's advisor and Gilmore & Bell PC served as bond counsel.
The bonds were sold through the Missouri Health and Educational Facilities Authority. The BJC system's 11 hospitals enjoy the top market share of 34.9% in the St. Louis regional market.
Proceeds of the sale, along with operating revenues over the next two years, will finance the second phase of its Siteman Cancer Center expansion and finance a three-floor addition at its BJC Institute of Health.
Other projects include construction of an outpatient pediatric center, planning work on renovations to its Barnes-Jewish Hospital's main campus, construction of a new facility at its Barnes-Jewish West County Hospital, and various equipment purchases.
Ahead of the sale, Standard & Poor's and Moody's Investors Service affirmed the system's double-A level ratings. After the sale, the system will carry $942 million of rated debt.
"BJC has continued to build on its balance sheet strength to absorb the upcoming series 2014 debt, and strong cash flow should maintain good coverage," Standard & Poor's said. The system also benefits from a well-seasoned management team that has focused strategically on wreathing pressures related to federal health care reform.
"BJC has shown a history of consistently strong operating cash flow generation, although the system has seen some softening in recent years. Nonetheless, debt service coverage remains strong on a moderate debt load and liquidity continues to grow," Moody's wrote.
The ratings also reflect the system's stable membership with a long track record of solid integration, its leading but not dominant market share in the St. Louis region which benefits from a national draw at its academic facilities.
Those facilities that bolster the systems' draw include its Barnes-Jewish hospital and St. Louis Children's Hospital. It also has a longtime academic relationship with the Washington University School of Medicine which is a top recipient of federal research dollars.
Its challenges include some softening of operating results in 2013 as the system saw declining inpatient admissions and emergency room visits, future capital plans, competition from other facilities, an increasing level of Medicaid/self pay load, and sizeable indirect debt from operating leases and underfunded pensions.
Bad debt also is pressuring the system.