Mercy Health Series 2020 Tax-Exempt Fixed Rate Bonds
Pricing Date: September 29, 2020
$36,900,000 Maturing in 2050
$341,670,000 Maturing in 2053
Objectives
In order to take advantage of the current low rate environment and bolster its balance sheet, Mercy Health (“Mercy”) aimed to achieve the lowest yield to maturity through selling as many 3.00% and 4.00% coupon bonds the market would allow.
Challenges
- Expediting the financing to price the bonds before the influx of healthcare supply in October.
- Avoid using year-end stub financials given the focus on performance during peak Covid-19 months.
- Obtaining strong investor interest while intending to sell over $340 million of 33 year bonds.
- Achieving favorable spreads relative to its peers as a strong A1/A+ Health System
Solution
- Accelerated the audit release: Mercy worked with its auditors to complete and publish the Fiscal Year 2020 Audited financial statements by mid September.
- Kept open dialogue with potential investors: Mercy’s management team held a live investor call and made themselves available for 1-on-1 calls with multiple investors. By doing so, investors gained a good insight into Mercy’s story and strategy. The issue had over 25 unique investors receiving bond allocations.
- Structured the deal for maximum flexibility to size the transaction to demand: Mercy was able to increase the 33 year 3.00% bonds by over $65 million realizing significant savings on a yield to maturity basis.
- Locked-in 31 year cost of capital of 3.40% : The overall timing, process and flexibility allowed Mercy to achieve its goal despite all the challenges presented.
About Mercy Health: A1/A+ (Moody’s/S&P)
Mercy Health is the sixth largest Catholic healthcare system in the U.S. with hospitals, physician clinics, telehealth services, outpatient facilities, outreach ministries, and other health and human services primarily in Missouri, Oklahoma, and Arkansas. The contiguous coverage of the Mercy footprint creates a super-regional presence extending from St. Louis, Missouri southwest to Arkansas and the southern border of Oklahoma.
Pricing Results:
Comparable Bond Sales:
