Sharp HealthCare Series 2020AB Bonds
Pricing Date: September 17, 2020
$340,620,000 Series 2020AB Bonds:
$40,620,000 Serial Bonds (2020A)
$300,000,000 Term Bonds (2020B)
Objectives
Sharp HealthCare (“Sharp”) sought to take advantage of the current low rate environment to fund new money projects and refund existing debt to generate cash flow and present value savings.
Challenges
- Achieving Index-Eligible pricing given $250 million of par for the new money portion
- Effectively offering limited par of taxable serials
- Incorporating MTI amendments that will not take effect until 2024 when Sharp receives majority consent from bondholders
- Mitigating interest rate risk for anticipated new money and refunding needs in 2024
Solution
- Pushed $50 million of par from the serials to the 30 year maturity: The pricing benefit of achieving Index-Eligiblity generated $8 million in present value savings.
- Serial maturities benefited from the wider investor base: Sharp was able to take advantage of Index-Eligible investor base and sell $40.6 million of serial bonds resulting in credit spreads between 30-120 basis points.
- Incorporated proposed MTI amendments in the Supplemental Indentures: The proposed amendments provided added flexibility for Note Substitutions and effectuating future MTI/Supplemental amendments. Sharp was also able to improve covenants and definitions including Debt Service Coverage Ratio and Limitations on Additional Debt.
- Hedged a portion of the anticipated 2024 bond issue: Sharp executed a hedge strategy to lock in current rates.
About Sharp HealthCare: Aa3/AA (Moody’s/S&P)
Sharp HealthCare is a California nonprofit public benefit corporation with its corporate offices in San Diego, California. The Corporation and its affiliated entities operate a variety of facilities and programs throughout the San Diego County, which is home to a population of approximately 3.35 million. As of June 30, 2020 , the Corporation was licensed for 2, 191 beds and had approximately 2,700 physicians on medical staffs and in affiliated medical groups.
Pricing Results:
Comparable Bond Sales:
