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:
- Complete transaction in a short timeframe
- Capture optimal long-term fixed interest rate
- Obtain longer tenor, which banks are unable to offer
- Maintain existing MTI package – Insurance investors typically seek more restrictive package
- 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
- 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.
- Marketing & Placement Process: Inova retained two placement agents to augment investor exposure/discussions, and generated solid investor interest for pricing.
- 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:
- Substitution of notes without rating qualifier
- No Anti-Cookson Clause regarding restrictions on non-obligated group activity
- No Most Favored Lender clause
- 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:
- 17 investors contacted
- Investor presentation viewed by 12 unique firms
- Scheduled 3 1×1 calls with investors
- $635 million total orders generated
- Over 2x oversubscription; credit spread was tightened by 5 bps
- 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.