Sanford Health priced $737 Million of Fixed Rate Bonds
|Deal Type||Debt Capital Markets|
$384.6 Million (Taxable)
$352.4 Million (Tax-Exempt)
Fixed Rate Bonds
|Client & Transactional Partners||Sanford Health||Our Role||Sole Manager|
Cain Brothers served as Sole Manager for $736,975,000 of fixed rate bonds (the “Bonds”) for Sanford Health (“Sanford”), comprised of $352,375,000 Series 2019A tax-exempt bonds and $384,600,000 Series 2019B taxable bonds rated “NR/A+/A+”. Sanford is headquartered in Sioux Falls, SD and owns or manages 40 hospitals in western Minnesota, Iowa and the Dakotas with a service area covering more than 250,000 square miles. Sanford employs over 24,000 full time employees, including approximately 1,450 physicians and reported revenues of $4.8 billion and $2.7 billion in net assets for the 2018 fiscal year.
On January 2, 2019, Sanford affiliated with Evangelical Lutheran Good Samaritan Society (“ELGSS”) assuming approximately $630 million of tax-exempt bonds and other liabilities. The addition of ELGSS provides Sanford a post-acute care presence in 24 states at 375 facilities with more than half of the facilities in Sanford’s footprint acute care markets.
In June 2019, Sanford closed on a $655,006,000 bridge loan (the “Bridge) with KeyBanc Capital Markets (“KBCM”), structured and closed over a one-month period, to preserve “Acquisition Financing” treatment related to the ELGSS bonds. The Bridge represents one of the largest non-syndicated bridge financings ever completed for a not-for-profit health care credit and is an illustration of the balance sheet lending that Cain Brothers can provide its clients as a division of KBCM. The Bridge, which refinanced ELGSS’s fixed rate bonds, generated approximately $5.1 million in savings between June 27 and November 20, 2019.
Proceeds of the Bonds were used to refinance the Bridge, Sanford Series 2009 bonds, Sanford Series 2014C and E Bonds, and several bank loans. As previously mentioned, Sanford utilized “Acquisition Financing” provisions to issue the tax-exempt 2019A bonds which allow for tax-exempt proceeds to advance refund bonds. As part of the financing process, Sanford also modernized its Master Trust Indenture and received a new credit rating of A+ (positive) from Fitch. The permanent financing and Bridge generated $146.3 million in total cash flow savings, with $90.9 million in NPV savings or 12.9% of refunded par. The 2049 tax-exempt maturity with a 5.00% coupon priced at a spread of 60 basis points to MMD for a yield to the 10-year call of 2.73% and the 2049 taxable maturity priced at a 155 basis point spread to the 30-year Treasury, resulting in a yield of 3.85%. Investor demand was significant with approximately 100 accounts participating in the two order periods with orders of approximately $3.4 billion.
For more information, contact Bart Plank, Managing Director, Co-Head Healthcare Public Finance at (212) 981-6915 or Taaha Shaikh, Director Healthcare Public Finance at (212) 981-6903.