CHICAGO — The Illinois Finance Authority advanced plans for nearly $1 billion in borrowing on behalf of not-for-profit schools and hospitals including the University of Chicago.
The Chicago school will head into the market Wednesday with a $550 million tax-exempt and taxable issue after the IFA gave final approval at a meeting Thursday as the conduit for the $400 million tax-exempt portion of the sale.
The university will sell under its own name $150 million of taxable bonds with bookrunning senior manager Barclays taking indications on that piece Tuesday, according to market participants.
Rating agencies affirmed the university ahead of the sale.
Fitch Ratings assigns the school on Chicago's south side its AA-plus rating with a stable outlook. Moody's Investors Service assigns its Aa2 rating with a stable outlook, and Standard & Poor's rates the school AA with a negative outlook.
The rating "reflects our view of the university's strong enterprise profile, history of impressive fundraising capacity, and breadth and depth of its operations, all of which we expect will continue in the near term," said Standard & Poor's analyst Jessica Matsumori.
The affirmation comes as the university's strong balance sheet is pressured by its long term $1.5 billion capital plan and programming strategy that calls for deliberate deficits through fiscal 2018.
"While we recognize the initiatives of this plan may help better position the university in the long run, the prolonged deficits and debt levels produce credit risks that may result in a credit profile that is more in line with the AA-minus rating within the outlook period," Matsumori wrote.
The tax-exempt piece will provide $200 million for new projects with the remainder refunding 2007 debt. The $150 million taxable series will fund projects. The school's strategic plan relies on $800 million of new debt.
"Rating stability depends on UChicago's ability to sustain recent operating improvement and return to a breakeven level of performance, on a full accrual basis, as planned by fiscal 2018, while at the same time successfully managing a sizeable capital plan and preserving balance sheet resources," Fitch wrote. "Failure to stabilize operations as planned will cause downward rating pressure."
Fall 2014 enrollment at the highly selective university totaled 15,244 with graduate students making up about half that figure.
RBC Capital Markets is co-senior manager with another three firms rounding out the syndicate. Prager & Co. LLC is advising the school.
The IFA board also advanced a $75 million refunding on behalf of Columbia College Chicago. The school in downtown Chicago is rated BBB-plus with a negative outlook by Standard & Poor's.
Loop Capital Markets LLC is senior manager and BMO Capital Markets is a co-manager. Public Financial Management Inc. is advising the school. The bonds will be a general corporate obligation issued under a new Master Trust Indenture, secured by a gross revenue pledge along with a mortgage or security interest in certain real estate assets.
The IFA board also advanced a $22 million new-money and refunding sale for Providence St. Mel School, a Catholic school in Chicago. The unrated bonds will be directly placed with Fifth Third Bank. William Blair & Co. LLC is advising the school.
The IFA board approved an up to $329 million new money and refunding sale for Advocate Health Care Network that will help fund a new bed tower and modernization project at Advocate Good Samaritan Hospital in the Chicago suburb of Downers Grove and refund 2010 debt.
The system, the largest not-for-profit healthcare provider in Illinois, carries ratings in the double-A category from Fitch, Moody's, and Standard & Poor's. Kaufman Hall is advising the system and JP Morgan is senior manager.
The board also signed off on Plymouth Place Inc.'s planned $65 million issue. The continuing care retirement facility is in a Chicago suburb.
The facility will seek a rating from Fitch, which is expected to land at a high, speculative grade level.
Ziegler is the underwriter and a feasibility study consultant is CliftonLarsonAllen LLP.