Salvation Army offering up taxables

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CHICAGO – The Illinois-based Salvation Army Central Territory is promoting both its balance sheet strengths and good deeds in marketing a $176 million taxable general revenue bond sale to fund projects and pay down a short-term credit line.

The “internationally recognized charitable corporation…assisted millions of Americans in fiscal year 2017 with various provisions of service” while its revenues and reserves are on the rise supporting a “strong balance sheet” that “provides cushion for operations and coverage of debt,” reads an investor slide presentation.


The Central Territory, based in the Chicago suburb of Hoffman Estates, serves 11 states and is one of four that operate under the national organization based in Alexandria, Virginia, although each of the four is legally a separate entity.

The Central Territory had more than $1 billion in revenues last year, with 44% coming from gifts, up from about $880 million in fiscal 2016, and it had $2 billion in investment assets in fiscal 2017, of which 58% is unrestricted.

The organization has $260 million in debt, including commercial paper, loans, and mortgages. “While there are not additional debt plans at the current time, the long-term capital plan being developed may result in additional long-term debt to enhance and maintain the corporation’s facilities,” reads the presentation.

JPMorgan is the lead underwriter with Morgan Stanley and BNY Mellon Capital Markets also serving as underwriters. Hilltop Securities Inc. is financial advisor. Foley & Lardner LLP is counsel to the organization and Orrick, Herrington & Sutcliff LLP is underwriter’s counsel.

Moody’s Investors Service rates the bonds Aa3 and S&P Global Ratings assigns its AA-minus rating.

“The Aa3 reflects TSA-CT's important role as a leading charitable organization with a global brand and substantial fundraising across many platforms. Growing and significant reserves, as well as very good liquidity, provide excellent coverage of debt,” Moody’s wrote. “The Army's strengthening balance sheet also provides a solid cushion for operations as operating margins and cash flow continue to feel pressure from rising demand for services driving expense growth.”

Other pressures include its distributed service model that complicates operations and large and growing liabilities for pension and retiree health care benefits that, while manageable, add to expense pressures.

“The stable outlook reflects expectations that the Army will at least maintain reserve and liquidity levels as it works to through operational challenges,” Moody’s added.

The Salvation Army runs hundreds of facilities including worship centers, thrift stores, community centers, adult rehabilitation centers, summer camps and day care centers. TSA-CT operates two programs of note - "Pathway of Hope", a program providing enhanced services to families with children to break the intergenerational poverty cycle, and Prisoner Rehabilitation services offered out of its Freedom Center in west Chicago, according to Moody’s.

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Primary bond market Taxable bonds Illinois
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