McLeod Regional Medical Center Series 2020A Tax-Exempt Fixed Rate Bonds
Rate Lock Date: March 13, 2020
Target Closing Date: August 6, 2020
$86,970,000 Series 2020A Tax-Exempt Fixed Rate Bonds
About McLeod Regional Medical Center
McLeod Regional Medical Center (“MRMC”) is a charitable, nonprofit corporation, located in the City of Florence, SC. MRMC owns and operates a 461-bed tertiary care facility, together with other hospital, surgical, urgent care, health and fitness, behavioral health, and hospice facilities located in Florence and Darlington Counties, SC. In addition, MRMC is majority owner in a joint venture that owns and operates three medical office buildings on the MRMC campus. McLeod Health (“McLeod”) is the parent corporation and sole member of MRMC. As of FY 2019, McLeod generated over $1.2 billion of total operating revenue and held over $2.1 billion of total assets.
Credit Ratings: NR/AA/AA- (Moody’s/S&P/Fitch)
Focus on Value
Ponder & Co. (“Ponder”) was engaged by McLeod to assist in evaluating different refinancing options for its Series 2010A bonds. The 2010A bonds have above market coupons, but were not eligible for current refinancing until 90 days in advance of their redemption date (11/2020). After a comprehensive review of public market and private market structures (both tax-exempt and taxable), Ponder recommended that McLeod move forward with a bank RFP process.
Ponder assisted McLeod in its efforts to reach out to its existing relationship banks as well as other active lending banks. McLeod ultimately received six fixed rate proposals. The leading proposal came from a bank with no existing lending relationship with McLeod. The proposal extended through final maturity, offered a low fixed rate, was executable on a forward basis, and required covenants consistent with McLeod’s existing Master Trust Indenture.
Ponder led a quick execution process, including negotiation of all key documents, that allowed McLeod to lock interest rates within two months of receiving proposals. This proved crucial given market volatility related to COVID-19 and oil market turmoil in March 2020.
Throughout the negotiation process, Ponder continually assessed the pricing available in the public and private markets to ensure that McLeod was locking-in maximum savings. Ultimately, the refinancing generated approximately $25.2 million of net present value savings (29.0% of par). Given the rise in public market rates and relative inaccessibility of capital, the bank option provided substantially greater savings. The bank rate-lock structure has allowed McLeod to eliminate interest rate uncertainly leading up the refunding date.