Bon Secour Mercy Health Series 2020, 2020A, and 2020B Bonds
Bond Sale Date: April 8, 2020
$1,160,995,000 Series 2020 Bonds, consisting of:
$389,680,000 Series 2020 Taxable Fixed Rate Bonds
$683,895,000 Series 2020A Tax-Exempt Fixed Rate Bonds
$87,380,000 Series 2020B Tax-Exempt Fixed Rate Put Bonds
About Bon Secour Mercy Health
Bon Secours Mercy Health, Inc. (“BSMH”) is the nation’s fifth largest Catholic nonprofit healthcare system, providing healthcare services across seven states and in Ireland. BSMH has pro forma operating revenues of $9.8 billion; together with its affiliated entities, the System provides care through diverse healthcare programs and services.
BSMH serves communities throughout Florida, South Carolina, Kentucky, Virginia, Maryland, New York, Ohio and Ireland with over 1,200 sites of care, including 48 acute care hospitals and more than 50 home health agencies and senior health housing facilities. BSMH employs over 60,000 people (including 2,600 physicians) and provides nearly $2 million per day in community benefits.
Credit Ratings: A1/A+/AA- (Moody’s/S&P/Fitch)
Focus on Value
Ponder & Co. (“Ponder”) worked closely with BSMH to develop and execute the sale of the System’s largest public offering, including both taxable and tax-exempt bond financing components. Proceeds refinanced bridge loans that funded several large-scale acquisitions, refinanced FRNs and provided $250MM for new money projects. The tax-exempt bonds were issued in three separate states, Ohio, Virginia and South Carolina, and constitute the largest tax-exempt healthcare transaction by a single borrower since 2019.
Ponder advised BSMH through all aspects of the transaction, including plan of finance development and rating agency strategy (in which BSMH received an upgrade and two rating affirmations). Ponder worked closely with the underwriting team to adapt the financing plan due to the unprecedented market volatility during the COVID-19 pandemic.
Due to market dislocation in early March, Ponder assisted the management team in identifying and establishing priorities among the various finance plan elements, and developed financing alternatives as the bond markets slowly reopened.
BSMH executed a multi-day marketing process, including net roadshow and one-on-one investor calls, to maximize investors’ interest and address myriad questions of COVID-19 impact on BSMH’s operating performance. As part of BSMH’s pricing strategy, the financing team utilized multiple bond structures to relieve pressure on the long amortizations, including a combination of 4% and 5% coupons to attract a variety of investors.
At pricing, BSMH received solid demand with $3.0 billion in orders from 36 taxable and 58 tax-exempt investors. Given the strong interest, the taxable credit spread was lowered by 17 bps, and spreads were lowered by 4-9 bps for the tax-exempt bonds.
Taxable Bond Issues – Comparable Bond Sales:
*BSMH locked in a credit spread 60 bps below what Rush locked in just six days earlier, despite the same ratings.