CHICAGO — Detroit-area Beaumont Health is coming to market in January with $408 million of single-A rated revenue bonds, the provider's first deal since a merger that created the largest system in southeast Michigan.

Royal-Oak based Beaumont, the largest of the three systems, merged with Dearborn-based Oakwood Healthcare Inc. and Botsford Healthcare in September.

The new system has $3.8 billion of annual revenues, eight hospitals, and more than 33,000 employees.

Beaumont Health has $1 billion of outstanding debt, according to Moody's Investors Service, which rates the bonds A1 with a stable outlook.

The $408 million sale, set to price in mid-January, will refund outstanding debt in part to generate debt-service savings. The savings will result in "improved debt coverage metrics of a nearly all fixed-rate debt structure," Moody's said in its report on the deal, noting the debt portfolio includes 93% fixed-rate bonds and 7% variable-rate debt.

"We expect financial performance to show stability over the near term given large-scale synergies outlined by management as it endeavors to create a highly centralized system," Moody's said.

Soon after the merger, Botsford announced plans for a $160 million expansion on its Farmington Hills campus. The project will feature a five-story new patient tower and will largely be financed with cash flow over the next five years, according to a report in Crain's Detroit Business.

The ability to access capital was one of Botsford's main reasons for the merger, the chief executive officer told Crain's.

Moody's warned of a handful of challenges facing the system, including relatively light liquidity of 137 days cash-on-hand; unresolved litigation; a competitive health care landscape; and Detroit's weak economy.

"The stable outlook reflects our belief that financial performance and debt service coverage should be maintained at current levels over the near term," Moody's said. "However, unexpected deviations from projections due to the inability to effect a smooth merger of the three legacy organizations may result in a rating downgrade given the below average liquidity measures."

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