Peninsula Regional Series 2020A Fixed Rate Bonds

29 Apr

Case studies

Peninsula Regional Series 2020A Fixed Rate Bonds

Bond Sale Date: April 28, 2020

$95,995,000 Series 2020A Fixed Rate Bonds

About Peninsula Regional Health System

Peninsula Regional Health System, Inc. (“PRHS”) is the largest and most dominant healthcare delivery system in the southern Maryland, southern Delaware and northern Virginia portions of the Delaware-Maryland-Virginia Peninsula (known as the “Delmarva Peninsula”).  PRHS owns and operates two acute care hospitals:  Peninsula Regional Medical Center (“PRMC”) — a 266-bed acute care hospital in Salisbury, Maryland, which anchors PRHS and is the only tertiary care and trauma center in a 50 mile radius, and Nanticoke Memorial Hospital (“Nanticoke”) — a 139-bed acute care community hospital in Seaford, in western Sussex County, Delaware, acquired by PRHS in January 2020.  PRHS also operates several outpatient facilities and ambulatory surgery centers throughout its service area and physician practices with 204 employed physicians and advance practice providers.  Ponder has served PRHS since 2006 as financial advisor for public bond issues and provided merger and acquisition advisory services in connection with PRHS’ acquisition of Nanticoke.

Pricing Results

Credit Ratings: A3/A (Moody’s/S&P)


Focus on Value

Ponder served as financial advisor to PRHS for its Series 2020A Bonds – a public fixed rate bond issue which will refund substantially all of Nanticoke’s outstanding debt, pay for a new $25.0 million free-standing medical facility near Crisfield, MD, and fund $33.5 million of renovation and equipment projects on the PRMC and Nanticoke campuses. PRHS took advantage of acquisition financing rules utilizing lower-cost tax-exempt bonds to refund the Nanticoke debt.

Ponder worked with PRHS’ team on developing the financing plan for the Series 2020A Bonds, which included restructuring the amortization for Nanticoke’s debt for annual cash flow savings and expanding PRHS’ obligated group to consist of PRHS, PRMC, Nanticoke and Nanticoke’s physician network.  Ponder also worked with PRHS management and the underwriters to craft the credit story for the rating agencies and investors, which featured PRHS’ strategy for coping with the ongoing COVID-19 pandemic and how the State of Maryland’s Health Services Cost Review Commission, which regulates Maryland hospital’s rates for health care services, will enable PRMC to charge more to make up lost revenue due to volume losses and prepare for increased COVID-19 related patient volume.

Despite challenging market conditions and rising interest rates, Ponder worked closely with the bond underwriters to structure the Series 2020A Bond offering and achieve an attractive cost of funds of 4.1%.   Before the bond sale, Ponder developed and PRHS adopted a “Continuing Disclosure Policy” to help maintain PRHS’ relationships with bond rating agencies, investors and other market participants, and undertake and implement continuing disclosure undertakings in compliance with SEC Rule 15c2-12.

Comparable Bond Sales: