Omaha Children’s Hospital & Medical Center Series 2020A & 2020B

13 May

Case studies

Omaha Children’s Hospital & Medical Center Series 2020A & 2020B

Bond Sale Date: May 12, 2020

$72,855,000 Series 2020A Tax-Exempt Fixed Rate Bonds

$26,470,000 Series 2020B Tax-Exempt Mandatory Put Bonds

About Children’s Hospital & Medical Center

Children’s Hospital & Medical Center (“Children’s”) is the only full-service pediatric health center in Nebraska. It has 145 licensed beds, 136 of which are currently staffed, and is home to Nebraska’s only Level IV regional neonatal intensive care unit (NICU), as well as the state’s only dedicated pediatric emergency department with the only American College of Surgeons-verified Level II Pediatric Trauma Center in Children’s service area.

A leader in pediatric health care, Children’s offers unique resources to children from across a five-state region and beyond, and conducts more than 675,000 patient visits each year. Children’s mission is to improve the life of every child through dedication to exceptional clinical care, research, education and advocacy. Children’s vision is to be a global leader for children’s health.

Due to increasing demand for services, Children’s will use the proceeds of the bonds to buildout the top floor the new Hubbard Center for Children patient tower, originally financed in 2017.

Pricing Results

Credit Ratings: A1/AA- (Moody’s/Fitch)

Omaha Children's Pricing Results

Focus on Value

Ponder & Co. (“Ponder”) worked closely with Children’s leadership throughout the financing process.  Ponder was engaged early in order to review various financing options including the new money component, refunding of existing debt, and converting variable to fixed to reduce interest rate risk. Ponder’s thorough analysis identified inappropriate assumptions used in the third-party analysis, which led to pulling a portion of the refunding out of the transaction, which kept Children’s from entering into a costly refunding thus saving them several million dollars.

When the tax-exempt market became dislocated in mid-March, Ponder worked with Children’s on contingency planning including setting savings targets for refunding and identifying potential bond structural changes to maintain a low cost of capital within parameters targeted by governance.  This contingency planning resulted in a recommendation to shorten the average life of the 2020A Bonds and to forego fixing the variable rate.  In early February fixing the variable rate would have resulted in a lower cost, however at the time of pricing converting to fixed would have increased the cost over 2.00%. Ponder also proposed issuing additional debt as a 5-year put bond to replace the equity contribution to the project, thus maintaining cash to weather the reduction in cash flow caused by COVID-19 and to provide the flexibility to pay down debt in 5-years if the cash is not needed to support operations.

On pricing day, Children’s received strong demand of almost 10x the bond size and received orders from over 65 unique investors. With this high demand, Ponder pushed for aggressive adjustments and spreads were tightened by 4-13bps across the various maturities.  Children’s locked in an all-in cost of capital near 3.50% for the Series 2020A long-term fixed rate bonds with a weighted average life of 17 years.

Comparable Bond Sales:

Omaha Children's Comparable Bond Sales