CHICAGO — Oct. 8, 2020 — Hammond Hanlon Camp LLC (“H2C”), a healthcare-focused investment banking firm, through its wholly owned subsidiary, H2C Securities Inc., served as the exclusive financial advisor to NorthShore University HealthSystem (“NorthShore”), Evanston, Ill., on the issuance of $517.1 million in tax-exempt bonds, consisting of $380.4 million in fixed rate bonds and $136.7 million in variable rate demand bonds.

 

H2C began working with NorthShore (Aa3/AA-/NR) in 2019 to develop a long-term strategic capital plan (the “Plan”) in advance of its acquisition of Swedish Covenant Hospital (“Swedish”). The Plan included the development of a consolidated financial forecast reflecting capital needs and debt capacity and a financing strategy to optimize NorthShore’s balance sheet while also supporting its strong credit profile objectives.  The Plan indicated that the health system would be best served by 1) integrating the debt of NorthShore and Swedish into one obligated group, 2) reducing NorthShore’s relatively high exposure to variable rate debt, and 3) increasing the cash on its balance sheet through the financing of prior capital expenditures.

 

NorthShore originally planned to price a fixed rate and put bond issue the week of March 9; however, as COVID-19 emerged in the United States and much of the U.S. economy shut down, the tax-exempt bond market collapsed. NorthShore’s financing team was forced to delay the bond issue amid market turbulence. H2C worked closely with NorthShore and other members of the financing team to quickly revise the plan of finance, pricing $380.4 million in fixed rate bonds on April 15—with low coupons through maturity to achieve an all-in cost of 3.19 percent, and $136.7 million in variable rate demand bonds on April 29. The fixed and variable rate bond issues closed on April 30, structured as one common plan of finance for tax purposes.

 

Ultimately, NorthShore generated approximately $17 million in present value savings from the refunding of its Series 2010 Bonds, reduced annual debt service payments by more than $4 million through 2038 by extending the final maturity of the debt by 11 years, and strengthened liquidity on its balance sheet.  

 

“H2C’s guidance and consistent focus on meeting our objectives for this financing enabled NorthShore to develop a capital structure that strengthened its balance sheet and operating profile and positions our organization to take advantage of new growth opportunities,” said Doug Welday, CFO, NorthShore.

 

“Although NorthShore had not issued bonds in the public market since 2010, the health system’s profile—with an exceptionally strong balance sheet, recent improvement in financial performance, and status as the leading healthcare provider in the northern suburbs of Chicago, bolstered by the addition of Swedish—was highly attractive to investors, enabling the execution of a successful transaction in the middle of a highly uncertain market,” said Victoria Poindexter, Principal, H2C. Email Victoria

 

For more information about this transaction, contact Victoria Poindexter or Phil Kaplan, Managing Director, H2C.