CHICAGO — Novi, Mich.-based Trinity Health Credit Group, one of the country’s largest health care systems, enters the market Wednesday with $276 million of debt.
The new-money portion of the sale will finance a variety of capital projects across eight states. Most of the proceeds will finance construction projects at hospitals in Michigan, Indiana, and Ohio.
The double-A rated system operates hospitals in nine states and typically enters the debt markets once a year. The system will have more than $2.7 billion of outstanding debt after the sale.
Conduit issuers from five states will issue the debt — all of which will be in a fixed-rate mode — on Trinity’s behalf. Proceeds from the Indiana sale will also finance smaller capital projects in additional states, officials said.
Co-senior managers Bank of America Merrill Lynch and Goldman, Sachs & Co. took retail orders on the debt Tuesday and will open it up to institutional buyers Wednesday. Officials hope for a strong mix of retail and institutional buyers.
“Our real objective is not only a cost-effective [transaction], but to spread the distribution around as much as possible, and get as much as possible in final investor hands, and retail does represent final investor hands,” said Jim Bosscher, Trinity’s senior vice president, treasury.
Trinity maintains an investor outreach program that includes semi-annual calls with investors, sending management to conferences, quarterly newsletters, and frequent phone calls, according to Bosscher.
“We try to ensure maximum transparency,” he said. “We have a very good story to tell, but our overarching outreach program is a strong desire to enable investors to make informed decisions.”
Trinity will also privately place $56 million of 10-year debt, marking the system’s first private placement. The purchasing bank, which Bosscher declined to identify, will buy the bonds through a program offered under the American Recovery and Reinvestment Act.
A piece of this week’s issue will finance a $2.4 billion capital campaign that is expected to include roughly $250 million of annual borrowing over the next three years, officials said.
Today’s issue — including the private placement — totals $333 million. Of that, $160 million will be refunding bonds, $50 million will refinance outstanding commercial paper, and $123 million will be new money. The publicly offered portion of the debt is divided into five series of new-money and refunding bonds.
The Michigan Finance Authority will sell $136.2 million; the Indiana Finance Authority will sell $65.2 million; Franklin County, Ohio, will offer $25.4 million; the Idaho Health Facilities Authority will sell $27.8 million; and the Ontario, Ore., Hospital Facility Authority will offer $29.8 million. The debt is secured by a revenue pledge but not a mortgage pledge.
Moody’s Investors Service rates the debt Aa2, and Standard & Poor’s and Fitch Ratings assign double-A ratings. Analysts consider the system’s key strengths to be its size, geographical diversity, strong liquidity, and overall operating performance.
Analysts warned that the system’s ambitious capital campaign could strain its balance sheet, but noted that management tends to review the capital plan annually, scaling back on capital expenditures if necessary.