Services

We have built a reputation for serving our clients’ best interest as financial advisors. We do not underwrite or sell products. Our independent structure allows us the freedom to advise free of conflicts. Our team brings an average of 20 years of industry experience and they specifically focus on three critical business areas: Capital Advisory & Derivatives, Mergers & Acquisitions and Investment Management.

Investment Management

Investment Management

Ponder Investment Co. (PIC) focuses on creating customized investment solutions for each client. Instead of offering a set choice of fixed income investment products, we work with clients to determine their specific goals, objectives, constraints and liquidity preferences. It is from these critical discussions that we develop a unique investment program. Through ongoing, close communication with the client we are able to adjust the investment program should the needs of the client change.

For those clients with similar objectives, we have created relevant performance composites, which may be used to set expectations for performance of invested assets. A few of our composites are highlighted in the section below.

  • Enhanced Cash Short

    A higher-yielding alternative to money market funds with a target duration of three months. We seek to provide principal protection while enhancing return and providing daily liquidity. We manage both separate accounts and a trust vehicle, Ponder Enhanced Cash Trust (PECT), in this style. PECT’s inception date is September 30, 1997.

  • Enhanced Cash Long

    This investment approach suits a client with a strategic allocation to cash that may not be needed for day-to-day operating activities. The target duration for these assets is one year. Over time, the ability to extend beyond money market maturities is expected to enhance overall returns. Offered for separately managed accounts only.

  • One to Three Year

    An intermediate fixed income management approach with target duration of approximately 1.75 years. Suitable for assets that are not part of the liquidity reserves, but that may not be perpetual in nature. Offered for separately managed accounts only.

  • Core

    An intermediate to long-term fixed income approach suitable for debt service reserves, pensions, foundations or other “permanent” assets. This investment style should have the highest returns for those with a long-term horizon. The duration of these assets is approximately 3.50 years. Offered for separately managed accounts only.

M&A

Mergers & Acquisitions

Ponder & Co. actively assists in implementing strategic change for not-for-profit healthcare providers. Whether our clients are buying or selling a hospital or seeking to decide among strategic options, we have the experience and knowledge to provide guidance through the changing healthcare environment. The cornerstone of our business is providing experienced, knowledge-based advice to clients — free of conflicts.

  • Transaction Management

    Ponder & Co. has extensive experience in structuring and implementing a transaction process to maximize successful outcomes for our clients. We advise on sell-side and buy-side transactions, asset sales for cash, non-cash mergers and joint ventures.

    Our experience and independence led to engagements for two of the largest and most complex sales of not-for-profit healthcare systems to for-profit buyers — the sale of Hillcrest Healthcare to Ardent Health in 2004 and the sale of Health Midwest to HCA in 2003. While these transactions are noteworthy, more typical transactions involve only a single hospital.

    Once our clients decide on a strategic initiative, Ponder & Co. can:

    Structure the most effective process to assure a successful transaction
    Apply our extensive market knowledge
    Negotiate terms and conditions
    Our professionals begin by listening, asking critical questions and exploring strategic alternatives before making recommendations.

    The ability to understand our clients and to represent them effectively and confidentially is essential to successful outcomes. As a specialist, employee-owned firm, Ponder & Co. provides independent advice, free from external conflicts.

    In our experience, we see that not-for-profit healthcare providers increasingly need to be concerned about liability, criticism by the media and intervention by state attorney generals who are seeking more open processes. As a result, transactions by not-for-profit facilities are now being conducted in a more competitive environment and controlled auction processes are becoming the industry norm. The increased acceptance and importance of these processes reinforces the need for skilled and experienced M&A professionals.

  • Strategic Options

    Today, boards of directors and management teams face an increasingly complex and dynamic environment for healthcare services. Pressures on operating performance, such as access to capital, reimbursement and competitive and demographic changes in the marketplace combine to make a provider’s strategic options challenging.

    Ponder & Co. has the experience and knowledge to assist in systematically and objectively evaluating unique situations. Ponder’s strategic options assessment was created to provide our clients with a framework to help them get their arms around an ever-evolving healthcare marketplace. This service provides a comprehensive review of the hospitals performance as well as its position and outlook in its market.

Derivatives

Derivatives

Ponder & Co. provides independent advice to determine suitability and risk related to interest rate swaps or other derivative products. When it’s time to consider the use of derivatives, our clients need a partner with experience in this complex area. Accordingly, we help our clients develop a swap policy, which can be used as a guide for future decision-making. We do not act as counter-party in any transaction so our advice is objective and conflict-free.

  • Assessment of Appropriatness

    Ponder & Co.’s philosophy is to ensure that our clients make sound decisions and that they find the financial product and pricing that best suits their needs.

    Here is an example of a typical derivatives advisory engagement:

    Define Goals
    Articulate the client’s goals to focus the process on the important outcomes

    Education
    Create a clear understanding of the structure and components of a sound financial strategy

    Risk Analysis
    Expert risk analysis provides understanding of the types of risk:

    Compare risks across structures – traditional and synthetic
    Quantify risk, translating it into cash flow and present value dollars
    Given the price of risk, a decision can be made to be paid to assume risk or pay to avoid it

    Suitability
    Determine if the structure is suitable given the client’s financial condition and risk profile

    Market Timing
    Establish specific targets for executing the transaction and adhere to those targets

    Success
    A successful derivatives plan includes:

    Appropriate Swap Structure
    Effective Documentation – legal and credit terms, and fair pricing

  • Transaction Execution

    Step 1: Documentation

    • Ponder & Co. takes a different approach to standard documentation. Because the “industry standard” documents are not always in the best interest of a healthcare provider, we have developed our own accepted Ponder-standard documents.
    • Our goal: Shorten document-negotiating time for our clients and improve the results.
    • Draft and review the master ISDA, credit support annex and swap confirmation

    Step 2: Transaction Execution

    During the documentation process, an organization will choose the best way to execute the swap — a competitive bid involving several swap providers or negotiated pricing using a single swap provider. Ponder & Co. can manage either approach and has no vested interest in which approach a client chooses. Our objective is to educate our client on the pros and cons of each approach and to always protect our client’s interests.

    A. Competitive Transaction
    Identify potential swap counterparties
    Develop bid form
    Seek bids from interested parties
    Evaluate results and select best bid
    B. Negotiated Transaction
    Ponder & Co. follows a two-step process:
    Internal pricing: determine the price of the swap using the Ponder & Co. proprietary model and live LIBOR market prices
    Shadow pricing: determine the prices at which dealers are willing to execute, using these steps:
    Develop bid form
    Discuss shadow pricing process with dealers
    Seek several interested dealers
    Receive rate indications
    Price swap internally
    Advise client on current market conditions
    Negotiate the best interest rates

  • Market Monitoring

    Ponder & Co. continually monitors the derivative markets to keep abreast of the latest developments and pricing levels.

    ASC 815 Reporting – Performed In-House
    Valuation of “actual” swaps
    Valuation of the “hypothetical derivative” for fixed payer swaps
    Regression analysis to determine if a swap qualifies as a cash flow hedge or fair value hedge
    Cash flow reports comparing swap income and bond interest expense
    An independent third-party valuation to satisfy audit requirements
    Fair market value letters for board and bond counsel
    ASC 820 Reporting – Performed In-House
    Swap “Fair Market” valuation
    System credit evaluation
    Counterparty credit evaluation
    Credit adjustment based on asset/liability
    Collateral posting implications
    Risk/Performance Monitoring – Customized and Performed In-House
    Mark-to-market reports and history
    “Value at Risk” modeling
    Stress testing
    “What if” scenarios
    Portfolio approach or single trade
    Collateral Call Verification

Capital Advisory

Capital Advisory

Ponder & Co. provides advisory services to support capital market transactions for not-for-profit healthcare providers. We do not underwrite or sell securities so our advice is objective, conflict-free and always in our clients’ best interest.

  • Plan of Finance Development

    Ponder & Co. ensures that our clients make sound decisions for funding capital projects and that they use the financial products best suited for their needs. Healthcare CFOs face tremendous challenges and our professionals provide peace of mind by serving as an advocate in the structuring and pricing of any bond issue. We assist in the plan of finance development by:

    • Analyzing capital structure and credit profile
    • Evaluating debt capacity and sensitivity to additional borrowing
    • Analyzing debt refunding and defeasance potential
    • Assessing alternative capital sources
    • Evaluating costs and benefits of credit enhancement
    • Assessing capital mix, alternative debt structures and rating objectives
    • Analyzing derivative opportunities and risks
    • Developing capital access plans

    Here is an example of a typical financial advisory assignment:
    CLIENT’S OBJECTIVES

    • Comprehensive capital financing plan that supports the five-year strategic plan
    • Financing implementation to achieve the lowest cost of capital

    Ponder’s Role:
    ASSIST WITH DEVELOPING THE CAPITAL PLAN

    Appropriate levels of debt

    Types of debt

    Alternative financing vehicles

    Evaluate the opportunities and risks of using derivatives

    IMPLEMENT CAPITAL FINANCING PLAN

    Underwriter RFPs

    Credit enhancement strategy and credit presentations

    Negotiate fees

    Coordinate financing team

    Bond and derivatives pricing

  • Transaction Implementation

    Ponder & Co. provides advice and counsel to help our clients determine the best way to finance capital projects. We possess the same market knowledge as investment bankers. However, Ponder does not underwrite or distribute bonds. As a result, we have no vested interest in any particular financing plan or financial product. This allows us to serve as our client’s advocate and to support their best interests.

    Ponder & Co. has the expertise to:

    • Prepare and assist with credit rating presentations
    • Analyze serial and term bond structures and call features
    • Evaluate interest rate environment and market conditions
    • Develop financing timetable
    • Assist with selection and coordination of finance team
    • Negotiate issuance costs
    • Negotiate document provisions and financial covenants
    • Analyze escrow structures
    • Manage competitive or negotiated transactions
    • Advise on investing bond proceeds
  • Ongoing Monitoring

    Once a bond issue is completed, health systems will want to continue to monitor developments in the capital markets. Ponder & Co. prides itself on staying abreast of market conditions and assisting in post-transaction matters.

    Ponder & Co. can provide these post-transaction services:

    • Prepare pricing books and summary of transactions
    • Continuing disclosure documentation
    • Monitor variable rate bond markets
    • Other services as requested