DALLAS – Akron, Ohio-based Summa Health plans to price a $345 million deal this week that includes a refunding, conversion of variable-rate debt to fixed rate, and new money to partially fund the health system's expansion.
Fitch Ratings upgraded its outlook on the A-minus rated bonds to positive from stable ahead of the sale scheduled for Thursday.
The Series 2016 fixed-rate bonds will be sold through the Akron, Bath and Copley Joint Township Hospital District. Goldman Sachs is the lead manager. Squire Patton Boggs is bond counsel.
Fitch based the outlook change on the system's strengthened liquidity and cash reserves, improved profitability, light debt burden, strong market position and increased capital spending, according to the release.
Moody's Investors Service affirmed Summa's Baa1 rating and stable outlook. Moody's cited the health system's strengthened liquidity and cash reserves, manageable debt burden, leading market position, and strong management and governance structure.
"These bond ratings are significant as we come closer to the beginning of Phase 1 of our $350 million facility plan because they underscore the progress we are making on our population health commitment to our community and the responsible manner in which we manage the organization's finances," Summa chief financial officer Brian Derrick said in a prepared statement.
Summa said in an investor presentation that $100 million of the proceeds will go toward the system's $350 million transformation plan, in which it plans to invest up to $350 million in its facilities in and around Akron over the next 10 years.
The plan includes a new 300,000-square-foot patient tower at the hospital's main campus in downtown Akron; a 50,000-square-foot medical office building on the main campus; and modernizing Summa Barberton Hospital.
Changes at the Barberton campus likely are the first the health system will undertake.
A portion of the remaining bond proceeds will restructure a portion of Summa's variable-rate debt that is privately placed. Before the proposed financing, close to half of Summa's debt was directly placed with banks. Derrick said that after the transaction only 26% of its portfolio will remain privately placed with banks.
A portion will also be used to refund Summa's series 2010 bonds. "After the financing our current maximum annual debt service will be reduced to $28.1 million from $29.7 million," said Derrick.