Ponder & Co. provides advisory services to support capital market transactions for not-for-profit healthcare providers. We do not underwrite or sell securities so our advice is objective, conflict-free and always in our clients’ best interest.
Ponder & Co. ensures that our clients make sound decisions for funding capital projects and that they use the financial products best suited for their needs. Healthcare CFOs face tremendous challenges and our professionals provide peace of mind by serving as an advocate in the structuring and pricing of any bond issue. We assist in the plan of finance development by:
- Analyzing capital structure and credit profile
- Evaluating debt capacity and sensitivity to additional borrowing
- Analyzing debt refunding and defeasance potential
- Assessing alternative capital sources
- Evaluating costs and benefits of credit enhancement
- Assessing capital mix, alternative debt structures and rating objectives
- Analyzing derivative opportunities and risks
- Developing capital access plans
Here is an example of a typical financial advisory assignment:
- Comprehensive capital financing plan that supports the five-year strategic plan
- Financing implementation to achieve the lowest cost of capital
Assist with developing the capital plan
- Appropriate levels of debt
- Types of debt
- Alternative financing vehicles
- Evaluate the opportunities and risks of using derivatives
Implement capital financing plan
- Underwriter RFPs
- Credit enhancement strategy and credit presentations
- Negotiate fees
- Coordinate financing team
- Bond and derivatives pricing
Ponder & Co. provides advice and counsel to help our clients determine the best way to finance capital projects. We possess the same market knowledge as investment bankers. However, Ponder does not underwrite or distribute bonds. As a result, we have no vested interest in any particular financing plan or financial product. This allows us to serve as our client’s advocate and to support their best interests.
Ponder & Co. has the expertise to:
- Prepare and assist with credit rating presentations
- Analyze serial and term bond structures and call features
- Evaluate interest rate environment and market conditions
- Develop financing timetable
- Assist with selection and coordination of finance team
- Negotiate issuance costs
- Negotiate document provisions and financial covenants
- Analyze escrow structures
- Manage competitive or negotiated transactions
- Advise on investing bond proceeds
Once a bond issue is completed, health systems will want to continue to monitor developments in the capital markets. Ponder & Co. prides itself on staying abreast of market conditions and assisting in post-transaction matters.
Ponder & Co. can provide these post-transaction services:
- Prepare pricing books and summary of transactions
- Continuing disclosure documentation
- Monitor variable rate bond markets
- Other services as requested
In January 2013, Ponder entered into a strategic consulting arrangement with Evergreen Financial Services, a New Jersey-based capital advisory firm that provides financial services to the hospital and senior living industries. Working together, an expanded level of services is now provided to clients on a seamless basis. Kathryn Fern founded Evergreen Financial Services and serves as principal.
Ponder & Co. provides independent advice to determine suitability and risk related to interest rate swaps or other derivative products. When it’s time to consider the use of derivatives, our clients need a partner with experience in this complex area. Accordingly, we help our clients develop a swap policy, which can be used as a guide for future decision-making. We do not act as counter-party in any transaction so our advice is objective and conflict-free.
Ponder & Co.'s philosophy is to ensure that our clients make sound decisions and that they find the financial product and pricing that best suits their needs.
Here is an example of a typical derivatives advisory engagement:
Articulate the client's goals to focus the process on the important outcomes
Create a clear understanding of the structure and components of a sound financial strategy
Expert risk analysis provides understanding of the types of risk:
- Compare risks across structures - traditional and synthetic
- Quantify risk, translating it into cash flow and present value dollars
Given the price of risk, a decision can be made to be paid to assume risk or pay to avoid it
Determine if the structure is suitable given the client's financial condition and risk profile
Establish specific targets for executing the transaction and adhere to those targets
A successful derivatives plan includes:
- Appropriate Swap Structure
- Effective Documentation - legal and credit terms, and fair pricing
Step 1: Documentation
Ponder & Co. takes a different approach to standard documentation. Because the "industry standard" documents are not always in the best interest of a healthcare provider, we have developed our own accepted Ponder-standard documents.
Our goal: Shorten document-negotiating time for our clients and improve the results.
- Draft and review the master ISDA, credit support annex and swap confirmation
Step 2: Transaction Execution
During the documentation process, an organization will choose the best way to execute the swap — a competitive bid involving several swap providers or negotiated pricing using a single swap provider. Ponder & Co. can manage either approach and has no vested interest in which approach a client chooses. Our objective is to educate our client on the pros and cons of each approach and to always protect our client's interests.
A. Competitive Transaction
- Identify potential swap counterparties
- Develop bid form
- Seek bids from interested parties
- Evaluate results and select best bid
B. Negotiated Transaction
Ponder & Co. follows a two-step process:
- Internal pricing: determine the price of the swap using the Ponder & Co. proprietary model and live LIBOR market prices
- Shadow pricing: determine the prices at which dealers are willing to execute, using these steps:
- Develop bid form
- Discuss shadow pricing process with dealers
- Seek several interested dealers
- Receive rate indications
- Price swap internally
- Advise client on current market conditions
- Negotiate the best interest rates
Ponder & Co. continually monitors the derivative markets to keep abreast of the latest developments and pricing levels.
FAS 133 Reporting – Performed In-House
- Valuation of "actual" swaps
- Valuation of the "hypothetical derivative" for fixed payer swaps
- Regression analysis to determine if a swap qualifies as a cash flow hedge or fair value hedge
- Cash flow reports comparing swap income and bond interest expense
- An independent third-party valuation to satisfy audit requirements
- Fair market value letters for board and bond counsel
FAS 157 Reporting – Performed In-House
- Swap "Fair Market" valuation
- System credit evaluation
- Counterparty credit evaluation
- Credit adjustment based on asset/liability
- Collateral posting implications
Risk/Performance Monitoring – Customized and Performed In-House
- Mark-to-market reports and history
- "Value at Risk" modeling
- Stress testing
- "What if" scenarios
- Portfolio approach or single trade
- Collateral Call Verification
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