Wake Forest Baptist Series 2019ABC Tax-Exempt Fixed Rate Bonds

21 Feb

Case studies

Wake Forest Baptist Series 2019ABC Tax-Exempt Fixed Rate Bonds

$206,235,000 Series 2019ABC Tax-Exempt Fixed Rate Bonds

Wake Forest Baptist

Wake Forest Baptist (WFB) is an integrated clinical, research and academic enterprise headquartered in Winston-Salem, NC. It provides services on five acute care hospital campuses in North Carolina and operates a non-acute and ambulatory network with over 300 sites of patient care, an increase of 75 since 2016. WFB currently employs approximately 1,525 physicians in patient care, teaching and research operations. Its service area is comprised of 19 North Carolina counties and five Virginia counties. Its degree-granting educational programs annually train over 1,900 students in health care-related fields and it receives over $210 million annually in research funding from federal and state agencies, industry and other sources. In September 2018, Wake Forest Baptist acquired High Point Regional Health, including its 351-bed acute care hospital located in High Point, North Carolina. In FY2018, WFB had approximately $2.9 billion in operating revenue.

Comparable Bond Sales

Focus on Value

Ponder has served as financial advisor to WFB since 2016.

The $206 million Series 2019 bond issue will be used to refund an existing $46 million bridge loan as well as to finance $165 million of new projects. The bonds were issued as a mix of fixed rate debt and put bonds (in years 2022 and 2026). The fixed rate bonds were used to refund a bridge loan. Given the short life of the refunding, WFB
was able to lock in a low cost of funds and significant savings. In addition, WFB was looking to implement a variable rate strategy for the new money to diversify from its 80% fixed rate debt. Given market conditions, a put bond pricing was selected as it provided the desired low cost (2.20% and 2.55% respectively) with less risk than a traditional 7-day VRDN, and allowed WFB to issue bonds that are in high demand.

Given the significant growth of the organization, Ponder worked closely with management to develop and execute its rating agency and investor outreach strategy. On the day of pricing, Ponder worked closely with the underwriters to structure the financing. In particular, WFB was able to issue its put bonds as par bonds (versus more high demand premium bonds) with little additional cost. Through careful management, WFB was able to issue its bonds within 10 bps of another healthcare deal in the market, even though the other deal was rated 3-4 notches higher at AA/AA+ and did not have the sixmonth optional call that was added to the WFB bonds.

Pricing Results:

Credit Ratings: A2/A

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