CHICAGO — South Dakota’s Regional Health today will offer $57 million of fixed-rate revenue bonds that will be used to fund various capital projects and refund a chunk of fixed-rate debt to achieve savings.
Headquartered in Rapid City, the six-hospital nonprofit system dominates the local market with a large network of facilities and the only tertiary care facility in a 350-mile area.
Its facilities are located in western South Dakota and Wyoming.
Regional generally enters the market every two years and last sold bonds in August 2008, a few months before the market collapse, said Mark Thompson, vice president of finance.
The borrowing comes as the system enjoys one of its best years of operating performance, according to Moody’s Investors Service.
Moody’s, the only rating agency to rate Regional, rates the debt A1 with a stable outlook.
Its strong performance has led to a 111% increase in cash flow over 2009’s operating performance, and is due mostly to management-imposed expense cuts, Moody’s said.
Today’s offering is made up of $24.9 million of new money and $37.4 million of refunding bonds. Roughly $808,000 will go toward issuance costs and underwriter’s discount.
Piper Jaffray & Co. is the underwriter and Jones Day is bond counsel. The South Dakota Health and Educational Facilities Authority is acting as conduit issuer for the bonds.
Regional expects to achieve a net present-value savings of $1.6 million with the refunding, Thompson said.
The bonds are secured by an interest on the obligated group’s unrestricted receivables and a mortgage on certain hospital properties.
The debt features a final maturity of 2029.
After the sale Regional will have a total of $142 million of debt, of which $67 million is in a variable-rate mode.
Nearly all of the variable-rate debt is hedged with a floating-to-fixed rate interest swap with US Bank.