MaineGeneral Medical Center FHA Bonds

15 Jan

Case studies

MaineGeneral Medical Center FHA Bonds

Pricing Date: December 21, 2020

Closing Date: January 13, 2021

$299,371,500 FHA 223(f)

Maturity Date: July 6, 2046


MaineGeneral Medical Center (MGMC) sought to lower the cost of its existing debt and alleviate pressure from its onerous covenants. Its $279 million of existing bonds had an average coupon of 6.90%, with annual debt service of $26 million.


  1. MGMC maintained non-investment grade ratings of “BB” and “Ba3”
  2. A tax-exempt advanced refunding was prohibited, requiring the use of taxable bonds before 7/2021
  3. Credit spreads increased dramatically after the COVID pandemic began, especially for lower rated credits and taxable bonds
  4. Interest rates were very attractive in 2020 with an expectation of rates increasing in 2021


  1. Options Assessment: Ponder reviewed MGMC’s various funding options, including public bond deals (both taxable and tax exempt) on MGMC’s credit, using the MHHEFA Moral Obligation program, private transactions through interested lenders and a credit enhanced offering (private insurance or federal government backed)
  2. Structure Selection: For years, a potential tax-exempt refunding under MHHEFA’s Moral Obligation program in 2021 provided the greatest interest savings, but with the shift in markets due to the pandemic, a taxable HUD Backed transaction was determined to provide similar savings without the risk of waiting an additional year
  3. Execution: Wells Fargo was selected as banker and the process which began in June culminated in a December 2020 pricing and the issuance of $299 million HUD backed bonds on January 13, 2021

Transaction Highlights

  1. MGMC lowered its all-in interest rate from 6.90% to 2.89%
  2. Annual cash flow savings of $4.5 million (with savings of $8.0+ million thru 2041); Present value savings: $91 million (32.5% of par)
  3. One of only two borrowers to have a 1-year reserve fund approved by HUD (the other is “AA” rated NY Presbyterian)
  4. Largest 223(f) GNMA financing loan ever; largest HUD supported healthcare borrowing since 2016 and 7th largest since 2001
  5. More flexible covenants, with limited events of default

About MaineGeneral Medical Center: Ba3 (Moody’s)

MGMC is a comprehensive non-profit health system which includes two hospital campuses, a 24/7 emergency department, the Harold Alfond Center for Cancer Care, physician practices, nursing homes, specialized rehabilitation, mental health and substance use disorder services, home health care, hospice services and a number of community outreach programs.

Comparable Bond Sales:

MaineGeneral FHA Comparable Bond Sales