Bristol Hospital $60,440,000 Financing (Series 2019)
June 17, 2019
Cain Brothers served as Placement Agent in the limited offering of $34,630,000 of tax-exempt and $25,810,000 of taxable fixed rate revenue bonds on behalf of Bristol Hospital and Health Care Group Inc. (“BHHCG”). BHHCG operates an integrated network of acute care, ambulatory, and advance practice providers that provides a full-continuum of both inpatient and outpatient services to residents of the greater Bristol, Connecticut area. Bristol Hospital, a 154 licensed bed (135 beds currently staffed) acute care hospital, offers patients a complete range of services. The Hospital’s emergency department cares for more than 35,000 patients each year. In addition to the main campus, the Hospital operates several outpatient sites.
Proceeds of the tax-exempt bonds will be used to finance the renovation and expansion of the Hospital’s emergency department to meet future demands and standards of care while relieving overcrowding during times of peak demand (the “Project”). The Project will also add 10 dedicated behavioral health exam rooms to the emergency department. In addition to financing the Project, the Hospital took advantage of the current market to refund its outstanding Series 2002 bonds, securing present value savings of approximately $1.72 million and improving its financial covenants.
Proceeds of the taxable bonds will be used to finance the Hospital’s unfunded pension liability. Historically, the Hospital’s annual contribution towards its unfunded pension liability (an average of $5.25 million for the past two years) has been funded with operating cash flow. This financing will fully fund the pension liability and eliminate the annual contribution requirement and the uncertainty and volatility regarding the amount of the contribution. The Hospital will lock-in average annual taxable debt service of $2.65 million in place of the annual contributions which are subject to equity market valuation volatility. The result is an increase in debt capacity for BHHCG due to the stability of the new debt service payments and the lower burden on operating cash flow. With equity values at record highs and interest rates at very attractive levels, this was an opportune time for this transaction from both perspectives.
A competitive private placement process led by Cain Brothers resulted in robust investor demand, facilitating an attractive 30-year final maturity yield of 3.95% and all-in cost of capital of 4.44% for the tax-exempt bonds and a 15-year final maturity yield of 5.99% and all-in cost of capital of 6.47% for the taxable bonds. In addition, the security package did not include a funded debt service reserve fund.