Marshfield Clinic Health System Series 2020, A, B and C
Bond Sale Date: June 16, 2020
$148,583,000 Series 2020 Taxable Bonds AGM Insured
$75,000,000 Series 2020A Fixed Rate Mode Bonds AGM Insured
$132,745,000 Series 2020B Term Rate Mode Bonds
$75,000,000 Series 2020C R-FLOATS Rate Mode Bonds
Objectives
Fund asset acquisitions, provide $100MM of strategic capital, reduce bank exposure via restructuring of existing debt, maintain product diversification and update MTI while also minimizing cost of capital and increase in MADS with reasonable assumption of risk.
Challenges
- Maintain rating levels and increase capital during COVID-19 pandemic.
- Significant market volatility and uncertain investor demand.
Solution
Ponder advised MCHS through all aspects of the transaction, including plan of finance development and credit strategy (in which MCHS maintained its rating levels during COVID-19 pandemic). Ponder assisted the management team with risk assessment and review of financing alternatives, keeping key objectives firmly in mind. Ponder worked closely with the underwriting team to optimize a financing plan, including the strategic use of Assured Guaranty bond insurance, while navigating market volatility during the COVID-19 pandemic.
Ponder recommended multiple bond structures to help keep all-in cost low, relieve MTI debt service pressure and attract a broad array of investors. Put bonds and RFLOATS, a proprietary Bank of America variable-rate debt product, were used as alternatives to bank direct purchase and VRDBs to help maintain low cost of capital and product diversification while reducing overall bank risk.
MCHS utilized a multi-day marketing process, including net roadshow and one-on-one investor calls, to maximize investors’ interest and address a myriad of questions regarding COVID-19 impact, MCHS’s operating performance and strategic growth. Opportune market timing coupled with extensive investor marketing led to strong demand with ~$3.0 billion in orders from 19 taxable and 46 tax-exempt investors. Given investor appetite, the taxable credit spread was lowered by 5 bps and tax-exempt spreads were lowered 5-15 bps. MCHS locked in an all-in cost of capital of 2.54% for the fixed rate component of the financing.
About Marshfield Clinic Health System: A-/A- (S&P/Fitch)
Marshfield Clinic Health System, Inc. (“MCHS”) is an integrated regional not-for-profit healthcare system, providing multispecialty healthcare services throughout central, northern and western Wisconsin and Michigan’s Upper Peninsula. MCHS had total revenues, total assets and total net assets of approximately $2.6 billion, $2.8 billion and $1.2 billion, respectively, as of and for FY2019. MCHS serves 316,000 unique patients and operates Security Health Plan of Wisconsin, which provides health insurance to over 200,000 members throughout the state of Wisconsin.
Pricing Results
Comparable Bond Sales:
