UNC Hospitals at Chapel Hill Series 2019 Tax-Exempt Fixed Rate Bonds

13 Nov

Case studies

UNC Hospitals at Chapel Hill Series 2019 Tax-Exempt Fixed Rate Bonds

$149,995,000 Series 2019 Tax-Exempt Fixed Rate Bonds

About University of North Carolina Hospitals at Chapel Hill

The University of North Carolina Hospitals at Chapel Hill (“UNCH”), an operating unit of the University of North Carolina Health Care System (the “System”), operates a multi-disciplinary, primary, secondary, tertiary and quaternary academic medical center. UNC Hospitals operates two acute care hospitals in Chapel Hill and Hillsborough. UNCH serves as a referral center for patients throughout North Carolina and is a primary source of care for patients in the local area.

The System is administered as an affiliated enterprise of The University of North Carolina system to provide patient care, facilitate the education of physicians and other health professionals, conduct research collaboratively with the health sciences schools of UNC-CH. The System includes Rex Healthcare, Inc. in Wake County (a separate Obligated Group), and maintains affiliations (through sole membership interests or management agreements) with nine other community hospitals in the State. The System also includes a substantial physician base, a CIN and an ACO as it prepares for population health.

Pricing Results

Credit Ratings: AA3/AA/NR


Focus on Value

Ponder & Co. (“Ponder”) has advised the System and its components since 2015 and worked closely with UNCH management to plan and execute the sale of its 2019 publicly-offered fixed rate bond issue. The 2019 financing is part of a longer term strategy (including transactions in 2015 and 2016) to position the System for the future as it embarks on a large building plan.

Before coming to market, Ponder worked with UNCH management to review its strategic goals, and develop its long-term plan. Ponder worked with UNCH to determine the optimal structure, timing and finance team. Ponder prepared management for its rating agency meetings and worked with the chosen investment banks in developing an optimal marketing strategy.

As the pricing approached, Ponder advised on the use of a unique couponing strategy which allowed UNCH to meet its dual goals of funding its projects and achieving the lowest cost of funds possible (on a yield to maturity basis). The majority of bonds were sold with a Make-Whole Redemption feature which traded optionality for cost and premium generation. During the order period, over 55 firms put in orders, and all but one of the investors who requested calls with management put in significant orders. Ultimately UNCH was able to achieve a cost of funds of 2.99% for a 30-year bond issue and generate approximately $199 million to fund key strategic projects.

Comparable Bond Sales