H2C INSIGHTS as of June 29, 2020
Rates and Economic News
From June 19 to June 26, 10-year and 30-year MMD rates increased by 2 bps and did not change, respectively, while 10-year and 30-year Treasury rates decreased by 6 bps and 10 bps, respectively. As a result, the 30-year MMD-to-Treasury ratio increased to 119 percent, compared with 110.9 percent last week. For the seven-day period ending June 24, municipal bond funds recorded $1.47 billion in net inflows, the seventh consecutive week of inflows.
SIFMA increased 1 bp to 0.13 percent. Tax-exempt municipal money-market fund assets decreased by $1.59 billion to total net assets of $131.1 billion for the seven-day period ending June 24.
On June 25, the U.S. Department of Labor reported that 1.48 million initial jobless claims were filed for the week ending June 20, approximately 60,000 less than the upwardly revised total of 1.54 million initial jobless claims in the prior week. This brings the total number of individuals who have filed for unemployment insurance in the past 13 weeks to 47.2 million. However, continuing claims, which details how many Americans remain unemployed, reached 19.5 million, a decline of 767,000 from the prior week’s downwardly revised 20.3 million.
On June 25, S&P published a report titled “Health Care Credit Beat: Industry Recovering From COVID-19, But Timelines Vary and Ailments Abound,” which, despite a positive tone, reaffirmed the sector’s negative outlook. Improved metrics such as increases in elective surgery volumes point to a recovery, but the healthcare sector suffers from high levels of uncertainty. For example, S&P highlighted how record levels of unemployment shift the payer mix away from commercial payers toward less-profitable government sources. Looking forward, S&P forecasts continued downgrades, but rating changes will be focused on company-specific factors. Additionally, S&P predicts that the impact of COVID-19 will last 12-18 months before seeing a material return to 2020 projections. Read the report.
New COVID-19 cases have reached record levels of infection not previously seen since April, causing many businesses and states to rethink reopening plans. New hot zones have emerged in Arizona, California, Florida, and Texas, with the latter two states reclosing bars. In Texas, Gov. Greg Abbott has halted elective surgeries in several key counties, such as Bexar, Dallas, Harris, and Travis. However, some surgeries that are “medically necessary to diagnose or correct a serious medical condition of, or to preserve the life of, a patient who without timely performance of the surgery or procedure would be at risk for serious adverse medical consequences or death” are permitted to occur as long as the surgery is performed in accordance with the accepted standard of clinical practice and would not lower the hospital’s ability to work with COVID-19 patients.
On June 17, Marshfield Clinic Health System (NR/A-/A-) Marshfield, Wis., priced a total of $148.6 million in taxable, fixed-rate bonds (Series 2020), structured as a bullet maturing in 2030, with a coupon of 2.7 percent and a spread of +195 bps to the 10-year Treasury maturing on March 15, 2030. The Series 2020 Bonds are insured by AGM (NR/AA/NR).
On June 29, Marshfield Clinic Health System (NR/A-/A-), Marshfield, Wis., priced a total of $75 million in tax-exempt, R-Float rate bonds (Series 2020C). The Series 2020C bonds mature in 2053, and the R-Float determination date is generally Thursday of each week that the Bonds are in weekly mode.
Both transactions are a part of Marshfield Clinic Health System’s larger financing of nearly $431.3 million in bonds, including the $75 million in tax-exempt, fixed-rate bonds (Series 2020A), $67.4 million in tax-exempt, five-year put bonds (Series 2020B-1), and $65.3 million in tax-exempt, seven-year put bonds (Series 2020B-2) which priced June 16.
On June 24, Children’s Hospital Colorado (A1/A+/NR), Aurora, Colo., priced a total of $105.7 million in in tax-exempt, variable-rate bonds (Series 2020A, Series 2020B). The Series 2020A and 2020B bonds are structured as variable-rate demand bonds bearing interest in the daily and weekly modes, respectively. Each series of bonds are supported by a LOC provided by TD Bank, which expires on July 1, 2025.
On June 25, IHC Health Services (Aa1/AA+/NR), Salt Lake City, Utah, priced a total of $524.5 million in bonds consisting of $200.0 million in tax-exempt, fixed-rate bonds (Series 2020A), $75.0 million in tax-exempt, four-year put bonds (Series 2020B-1), $75 million in tax-exempt, six-year put bonds (Series 2020B-2), and $174.5 million in taxable fixed-rate bonds (Series 2018). IHC Health Services achieved record low rates in the healthcare finance sector, breaking the 30-year record for long-term, tax-exempt fixed rate, long-term, taxable fixed rate, and tax-exempt put bonds.
The Series 2020A bonds have split maturities and comprise four term bonds. The $39.9 million term bond, maturing in 2043, has a coupon of 4 percent and priced at a YTC of 2.22 percent and a spread of +69 bps to 23-year MMD. The $70.3 million term bond, maturing in 2043, has a coupon of 5 percent and priced at a YTC of 2.00 percent and a spread 47 bps to 23-year MMD. The $20.1 million term bond, maturing in 2050, has a coupon of 3 percent and priced at a YTC of 2.67 percent and a spread of +104 bps to 30-year MMD. The $69.7 million term bond, maturing in 2050, has a coupon of 5 percent and priced at a yield of 2.13 percent and a spread of +50 bps to 30-year MMD.
The Series 2020B-1 bonds are structured as put bonds, with a 5 percent coupon, priced at a YTC of 0.69 percent, a spread of +36 bps to 4-year MMD, with a mandatory tender date of Aug. 1, 2024.
The Series 2020B-2 bonds are structured as put bonds, with a 5 percent coupon, priced at a YTC of 0.93 percent, a spread of +38 bps to 6-year MMD, with a mandatory tender date of August 1, 2026.
The taxable transaction was structured as a CUSIP tap reopening of the Series 2018 bonds. The additional bonds are structured as a bullet maturing in 2048, with a coupon of 4.13 percent, and priced at a spread of +120 bps to the 30-year Treasury (2.62 percent yield).
Emanate Health (NR/A/A+) Covina, Calif., is planning to price $160.4 million in bonds consisting of $154.6 million in tax-exempt, fixed-rate bonds (Series 2020A) and $5.8 million in taxable, fixed-rate bonds (Series 2020B). The bonds will be used to fund new capital projects and refund prior debt. (See Emanate Health POS.)
Wellforce Health (NR/BBB+/BBB+), Burlington, Mass., is planning to price $217.3 million of bonds consisting of $164 million in tax-exempt, fixed-rate bonds (Series 2020C) and $53.3 million in taxable, fixed-rate bonds (Series 2020D). The Series 2020C and 2020D bonds will be insured by AGM (NR/AA/NR). The bonds will be used to refund prior debt and fund capital projects. (See Wellforce Health POS.)
Boston Children’s Hospital (Aa2/AA/NR), Boston, Mass., is planning on pricing $300 million in taxable, fixed-rate bonds (Series 2020A). The bonds will be used for general corporate expenses. (See Boston Children’s POM.)
Maimonides Medical Center (Aa1/AA+/NR), Brooklyn, N.Y., is planning on pricing $140.9 million in tax-exempt, fixed-rate bonds (Series 2020). The Series 2020 bonds are FHA insured and will be used to fund new capital projects and a debt service reserve fund. (See Maimonides Medical Center POM.)
Asante Health (NR/A+/A+), Ashland, Ore., is planning to price $450 million in bonds consisting of $430 million in tax-exempt, fixed-rate bonds (Series 2020A) and $20 million in taxable, fixed-rate bonds (Series 2020B). The Series 2020A bonds and Series 2020B bonds will be used to fund new capital projects and refund prior debt. (See Asante Health POS.)
Recent Rating Transactions
Riverside Health System (IL): Assigned A2; Outlook stable
Nuvance Health (CT): Downgraded from A3 to Baa2; Outlook negative
MaineHealth (ME): Assigned A1; Outlook stable
Louisville Medical Center (KY): Affirmed BBB+; Outlook stable
Virtua Inc. (NJ): Affirmed AA-; Outlook revised to “negative” from stable
Bozeman Deaconess Health Services, Inc. (MT): Affirmed A; Outlook stable
Children’s Hospital Colorado (CO): Assigned A+; Outlook positive
Peninsula Regional Health System, Inc. (MD): Upgraded to AA- from A; Outlook stable
The Memorial Hospital at North Conway (NH): Affirmed A-; Outlook stable
MaineHealth (ME): Affirmed A+; Outlook revised to “stable” from positive
Asante Health (OR) Affirmed A+; Outlook stable
Children’s Hospital of Wisconsin, Inc. (WI): Affirmed AA; Outlook stable
Sharp Healthcare, Inc. (CA); Affirmed AA; Outlook stable
St. Joseph’s Healthcare System (NJ); Affirmed BBB-; Outlook stable
Emanate Health (CA): Assigned A; Outlook stable
Aspirus Inc. Obligated Group; Affirmed AA-; Outlook stable
Asante Health (OR): Assigned A+; Outlook stable
Holy Redeemer Health (PA): Downgraded to BB+ from BBB-; Outlook stable
Emanate Health (CA); Affirmed A+; Outlook stable
Marshfield Clinic (WI): Assigned A-; Outlook negative
Hammond Hanlon Camp LLC (“H2C”) is an independent, healthcare-focused strategic advisory and investment banking firm with a particular emphasis on the not-for-profit sector. The firm’s principals have been lead advisors on hundreds of transactions in the healthcare industry representing billions of dollars in value, offering the experience and industry knowledge to achieve the most favorable results.
858 242 4810
CAPITAL MARKETS UPDATE
MMD YIELD CURVE • Current vs. 1 Year Ago
UST YIELD CURVE • Current vs. 1 Year Ago
INTEREST RATE SNAPSHOT
Source: Bond Buyer, Bloomberg and MMD – Thomson Reuters Municipal Market Data as of June 26, 2020.
(1) Rates as of June 24, 2020.
For additional information, please contact Elaine Yao (email@example.com or 212 257 4509) or Phil Kaplan (firstname.lastname@example.org or 312 508 4212). The information presented herein was obtained from resources believed to be reliable and accurate, but Hammond Hanlon Camp LLC does not guaranty the accuracy or completeness, or assume a responsibility for any loss which may result from the action by any person upon such information. Such information is subject to change without notice and is not intended as a recommendation, offer, or solicitation with the respect to the purchase or sale of any security.