Inova Health System Senior Notes

3 Sep

Case studies

Inova Health System Senior Notes

Pricing Date: September 2, 2020

$260,000,000 Senior Notes Due May 15, 2048


Given current favorable market conditions, Inova Health System (“Inova”) intended to take advantage of low fixed interest rates to replenish $180mm of cash used to fund purchase of campus property and pre-fund $75mm tax-exempt put bonds due in 2021.


Given internal strategic initiatives and staffing constraints, Inova opted-out of accessing the public markets. Ponder was tasked to ensure Inova:

  1. Complete transaction in a short timeframe
  2. Capture optimal long-term fixed interest rate
  3. Obtain longer tenor, which banks are unable to offer
  4. Maintain existing MTI package – Insurance investors typically seek more restrictive package
  5. Generate amortizing term bonds to (a) wrap around Inova’s existing debt structure (b) utilize lower WAL ICURV benchmark rate in lieu of 30-yr UST
  6. Secure multiple investors given larger financing size


Inova accessed the taxable private placement market, ~1 month from kick-off to pricing, to achieve its goals of achieving transaction flexibility, quick execution, lowest cost with longest tenor.

  1. Marketing & Placement Process: Inova retained two placement agents to augment investor exposure/discussions, and generated solid investor interest for pricing.
  2. Security Package Negotiation: Ponder advised on drafting of the Note Purchase Agreement, favorably negotiated the preservation of Inova’s existing MTI package with investors. Key negotiation provisions included:
    1. Substitution of notes without rating qualifier
    2. No Anti-Cookson Clause regarding restrictions on non-obligated group activity
    3. No Most Favored Lender clause
  3. Structure Savings: Inova saved 18 bps by using the 22-year WAL ICURV benchmark

Investor Outreach Results

A broad-based investor outreach strategy was employed to target private placement investors with positive views of NFP healthcare industry and are flexible to Inova’s existing document terms. Outreach highlights included:

  1. 17 investors contacted
  2. Investor presentation viewed by 12 unique firms
  3. Scheduled 3 1×1 calls with investors
  4. $635 million total orders generated
    1. Over 2x oversubscription; credit spread was tightened by 5 bps
    2. 1 investor passed transaction based on document package

About Inova Health System (VA): Aa2/AA+ (Moody’s/S&P)

An integrated, not-for-profit healthcare delivery system that owns, operates and manages a network of hospitals, outpatient services, assisted living and long-term care facilities and health care centers. The System serves northern Virginia, Washington, D.C, and contiguous counties in Virginia and Maryland.

Pricing Results: