Bayhealth Medical Center Series 2021A and 2021B

1 Dec

Case studies

Bayhealth Medical Center Series 2021A and 2021B

Pricing Date: November 16, 2021

Closing Date: December 1, 2021

$92,820,000 Series 2021A Bonds

$26,340,000 Series 2021B Taxable Bonds


Bayhealth Medical Center (“Bayhealth”) sought to finance: 1) $100 million of qualifying capital projects at Bayhealth’s Kent and Sussex campuses with proceeds of the tax-exempt Series 2021A Bonds, and 2) $25 million of additional improvements at the Sussex campus that did not qualify for tax-exempt financing with the proceeds of the taxable Series 2021B Bonds.


  1. Project constraints required by the in-state issuance authority would have delayed the financing, requiring the bonds to be issued by an out-of-state authority.
  2. Adverse bond market conditions in the wake of the highest annual inflation reported in 31 years
  3. Small size of taxable bond with 10-year par call

Solutions and Results

  1. Accelerating the Financing: With the Fed announcement of initial steps to counteract persistent inflation, interest rates began to rise and Ponder advised Bayhealth to accelerate the financing schedule. Ponder then led the working group to a bond pricing less than two months after the underwriter selection, which resulted in an extremely attractive funding cost.
  2. Minimizing Interest Cost: With strong demand for the 3% 2050 term bond and market headwinds impacting demand for the shorter maturities, Ponder worked with the underwriter to move principal from the 4% 2046 term bond into the 2050 bond, materially lowering the yield-to-maturity on the overall bond financing. As part of the restructuring, the 2046 maturity was moved to 2044, which lowered the yield-to-maturity on the 4% bonds and led to 72% of the tax-exempt bonds being structured as the long 3% term bond, lowering the all-in TIC on the combined 2021A&B financing below 3%.
  3. Affording Bayhealth Flexibility in Spending Bond Proceeds: Bayhealth has over $190 million of projects that could be financed with proceeds of the tax-exempt 2021A Bonds, but one of the larger projects, an expansion of a patient tower at the Kent Campus, does not yet have all the necessary regulatory approvals. Ponder worked with tax counsel to ensure the remaining projects have sufficient useful lives to justify the weighted average maturity of the 2021A Bonds, while affording Bayhealth the flexibility to spend proceeds on the patient tower expansion once the approvals are obtained.

About Bayhealth Medical Center: ‘AA-/AA’ (S&P/Fitch)

Bayhealth is the second-largest healthcare delivery system in Delaware, has approximately 4,200 employees, including 455 active physicians, and had over 18,000 patient discharges for the year ended June 30, 2021. Bayhealth operates the sole acute care hospital in Kent County, as well as a new hospital in Sussex County, and maintains inpatient market share of 78% in its primary service area.

Pricing Results Series 2021A:

Bayhealth Series 2021A Pricing Results

Pricing Results Series 2021B:

Bayhealth Series 2021B Pricing Results

Comparable Bond Sales:

Bayhealth Series 2021A and B Comparable Bond Sales