CHICAGO — Froedtert & Community Health Inc. enters the market today to issue $187 million of revenue bonds to restructure some remaining insured auction-rate securities and variable-rate demand bonds and raise new money for various projects.

The bonds are being issued through the Wisconsin Health and Educational Facilities Authority. Morgan Stanley and Ziegler Capital Markets are the underwriters. Kaufman Hall & Associates is financial adviser. Quarles & Brady LLP is bond counsel.

About half of the fixed-rate issue represents new money to fund various capital projects and to reimburse the system for funding of its north tower expansion. Another $78 million will refund insured auction-rate securities sold in 2005 and $7 million of letter-of-credit-backed variable-rate demand bonds from a 2005 issue. The sale will include a mix of serial maturities and term bonds with a final maturity in 2039, according to Kaufman Hall.

Ahead of the sale, Fitch Ratings affirmed its AA-minus and stable outlook. Standard & Poor’s affirmed its AA-minus rating but revised the outlook to negative due in part to the increased debt load.

“The outlook revision reflects our concerns that F&CH’s balance sheet is strained due to the issuance of new debt coupled with softer operations in fiscal 2009 as compared to fiscal 2008,” wrote Standard & Poor’s analyst Brian ­Williamson.

Other factors that continue to strain the system include the competitive Milwaukee-area market it operates in, its ongoing assimilation of acquired facilities, and the lingering impact of the recession.

“While we believe that F&CH may be able to further improve its operations over the next two years, thereby bolstering its balance sheet, nevertheless the onus remains on management to execute on its plan,” Williamson said.

Fitch said the rating is supported by the system’s “solid profitability, growing market share position, and the excellent clinical reputation of Froedtert Memorial Lutheran Hospital and strong balance sheet liquidity.”

The system generated total revenues of $1.18 billion in fiscal 2009, the first full year of operations since Froedtert acquired SynergyHealth and its St. Joseph Community Hospital of West Bend and the West Bend Clinic in the summer of 2008. The system saw a drop in operating profitability due to the merger, but expects operating efficiencies to show up in fiscal 2010 results.

Wauwatosa-based Froedtert spent much of the last year working out details of both its affiliation with SynergyHealth and restructuring its insured variable-rate and auction-rate debt.

Froedtert and Synergy in 2008 signed an affiliation agreement that folds Synergy into Froedtert’s obligated group. Synergy had $70 million of outstanding debt compared to Froedtert’s $291 million at the time.

The union joined two systems that serve southeast Wisconsin. Synergy operates the St. Joseph’s 119-bed acute-care hospital, a 74-physician multi-specialty group, and the West Bend Clinic.

Froedtert operates the 655-bed FMLH and 237-bed Community Memorial Hospital. The flagship hospital shares a campus with the Medical College of Wisconsin and the Children’s Hospital and Health System.

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