Allegheny Health Network Series A Tax-Exempt Fixed Rate Bonds

20 Aug

Case studies

Allegheny Health Network Series A Tax-Exempt Fixed Rate Bonds

$943,365,000 – Series A Tax-Exempt Fixed Rate Bonds

About Allegheny Health Network Health

Allegheny Health Network (“AHN”) is a physician-led academic healthcare system that provides comprehensive healthcare services to its patients in western Pennsylvania and the adjacent regions of OH, WV, NY and MD. AHN is the clinical delivery components of an integrated delivery and financing system with Highmark Health as its parent company. Highmark Health is also the parent to Highmark Inc. which is the country’s 3rd largest Blues plan. AHN is headquartered in Pittsburgh and maintains eight acute care hospitals and affiliated providers between Pittsburgh, Erie and the surrounding communities. AHN maintains more than 2,200 beds, eight ambulatory surgical centers, six urgent care centers, and four Health + Wellness Pavilions. AHN employees over 19,700 people, with 1,200 physicians under staff. Currently, AHN maintains affiliations with three medical schools, while also controlling a research institute and four charitable foundations. In 2017, AHN’s consolidated total operating revenue was $3.1 billion.

Focus on Value:

Ponder served as financial advisor to AHN as the reconstituted system returned to the capital markets after a brief hiatus following the purchase of AHN’s assets by Highmark Health. This was the first transaction for the health system based on its own credit. The bond issue raised $1.0 billion in proceeds to completely restructure all existing debt.

Ponder assisted AHN throughout the financing process from banker selection, to Appendix A development, to rating agency strategy (securing a Standard & Poor’s A rating), and through a multi-state road show. This last step proved critical to the financing strategy given the unique and forward-looking partnership between AHN and Highmark. In addition, Ponder worked with AHN and its underwriters in developing a specific couponing structure, including advocating for a substantial amount of 4.00% coupons. The $283 million 2044 maturity is one of the largest 4.00% healthcare bond ever sold and saved AHN 27 bps on a yield to maturity basis compared to a 5.00% coupon. The bonds were well received by investors, with just over $3.0 billion in orders, and resulted in an attractive all in cost of funds of 4.12% for AHN.

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