Scripps Health Series 2019 Tax-Exempt Fixed Rate Private Placement

15 Nov

Case studies

Scripps Health Series 2019 Tax-Exempt Fixed Rate Private Placement

$99,360,000 Series 2019 Tax-Exempt Fixed Rate Private Placement

About Scripps Health

Scripps Health (“Scripps”) is the core organization of a community based integrated health care delivery system located in San Diego, CA. Scripps currently operates four acute-care hospitals on five campuses, 23 outpatient clinic locations, an extensive ambulatory network, home health care, associated support services and approximately 2,600 affiliated physicians. Since its founding in 1924, Scripps has grown from operating a single acute care hospital in La Jolla to operating its current, county-wide health care delivery system. Scripps currently owns and operates 2 of the trauma centers in San Diego County, one of the 10 largest hospitals in California, and one of the oldest and most prestigious multi-specialty clinics in Southern California.

Pricing Results

Credit Ratings: Aa3/AA/AA

*Series 2019 Bonds were NOT rated


Focus on Value

Ponder & Co. (“Ponder”) has advised Scripps since 2015 and worked closely with the Scripps team to develop, execute and implement the Series 2019 financing. The financing is part of a longer term strategy (including transactions in 2016 and 2017) to position the System for the future as it embarks on a large building plan.

Before coming to market, Ponder worked with Scripps’ management team to review its strategic goals and hone its long-term plan. The Scripps team was open to executing a variety of structures, so began its process by surveying the bank community to see if there was appetite to purchase the bonds privately. With Ponder’s guidance, Scripps requested proposals from ten banks, with eight banks responding. Given the 2036 final maturity (14.2 year average life), one of Scripps’ key goals was to lock in refunding savings for as long as possible. Scripps was presented with a variety of options, but focused on proposals from three banks which were able to purchase the bonds to maturity.

Terms and covenants varied significantly between proposals, but through negotiation, Ponder was able to simplify the covenant package required by the winning bank to include only MTI covenants with a rating trigger, and a few other immaterial additions. Scripps was also able to lock in the rate five months in advance of the call date, at no additional cost. Given the prohibition on advance refundings, this feature in particular took significant execution risk out of the transaction.

Ponder was also able to negotiate the rate down and Scripps was able to lock in greater present value savings than it could have achieved with a public bond offering ($28.2 million versus $20.7 million).