Boulder Community Health Series 2020 Tax-Exempt Fixed Rate Bonds
Bond Sale Date: August 5, 2020
$51,240,000 Series 2020 Tax-Exempt Fixed Rate Bonds
Given favorable market conditions, Boulder aimed to take advantage of low interest rates to convert intermediate debt to long-term fixed, reimburse itself for prior capital expenditures, and remediate a portion of existing debt used to finance assets at risk of becoming ineligible for exempt financing. Boulder’s additional goals were to achieve a reduction in MADS, realize PV savings, and modernize its MTI.
While reviewing options for renewing or restructuring intermediate debt, Ponder identified a potential issue with use of the proceeds tied to assets no longer controlled by Boulder in ~$35 million of bonds outstanding. A change in future use (which is likely) could lead to a significant cost to remediate debt in the future with a long-call provision.
Ponder advised Boulder through all aspects of the plan of finance development and execution.
To mitigate future issues from a likely change in use, Ponder suggested a restructuring of three series of bonds using both taxable and tax-exempt debt. This solution resulted in an indirect refinancing using recent assets with long lives to create significant cash flow savings.
Debt Structure: Ponder advised Boulder on a specific debt structure and what tenors to issue the debt in order to reduce MADS from ~$14mm to ~$11mm and provide NPV savings of over 10% on the refunding of currently callable debt.
Pricing: Ponder worked with the public underwriter to ensure that the lowest possible rate was achieved, and with the private bank to ensure that the given cost of capital was fair in the current markets.
Knowing the restructuring would impact more than 50% of the debt outstanding Ponder recommended amending and restating the MTI to provide flexibility on several covenants including DSC, both in how the ratio is calculated and that an EOD is only triggered if the covenant is violated for two consecutive years.
About Boulder Community Health: A3/A- (Moody’s/S&P)
Boulder Community Health (“Boulder”) operates a comprehensive health system, offering both hospital-based and outpatient and ambulatory services throughout Boulder County, Colorado and surrounding areas.