Hammond Hanlon Camp LLC Advises Baptist Health on $128.98 Million Refunding of Series 2017C and 2009A Bonds

posted on January 22, 2019

 

NEW YORK — Hammond Hanlon Camp LLC (“H2C”), a healthcare-focused investment banking firm, through its wholly-owned subsidiary H2C Securities Inc. ("H2C"), served as the exclusive financial advisor to Baptist Health (Baptist) of Louisville, Ky., in the issuance of $128.98 million in Series 2018A taxable bonds in August 2018.

 

Founded in 1924, Baptist is the largest health system in Kentucky, with eight acute care hospitals and 2,434 licensed beds.

 

Baptist’s Series 2017C and Series 2009A bonds had an average life of five years and a final maturity date of 2027. The call date on Baptist’s outstanding Series 2009A Bonds was Aug. 15, 2018, prompting Baptist to decide to issue Series 2018A bonds to refund this debt as well as its variable-rate Series 2017C bonds.

 

One of the challenges associated with the bond issue was that Baptist had experienced large operating losses in FY 2017 that led to rating downgrades. However, management implemented a performance improvement plan that resulted in operating income improvement of $100 million in less than a year.

 

For the plan of finance, H2C evaluated product options and amortization structures to optimize cost of capital and financial flexibility for Baptist.

 

Given the short average life of the Series 2009A and Series 2017C bonds, H2C recommended that Baptist issue taxable bonds to re-amortize the bonds and provide cash flow relief over the next eight years.

 

On Aug. 9, Baptist sold $128.98 million of Series 2018A bonds, which priced attractively compared with other similarly rated taxable bonds.

 

H2C assisted Baptist with the rating agency presentation to highlight Baptist’s successful turnaround. Baptist received a rating upgrade to “Baa1” with stable outlook from Moody’s Investors Service and an upgrade to “A” with positive outlook from Fitch Ratings.

H2C coordinated the public issuance process by working alongside underwriters and legal counsel to issue and close the bond financing.

 

“H2C’s creativity and extensive experience helped us optimize our debt structure and strengthened our financial health,” said Stephen R. Oglesby, CFO, Baptist Health. “H2C’s recommendation to issue long-term taxable bonds is estimated to generate $104 million of cash flow relief over the next eight years.”

 

“It was a privilege to work with the outstanding team at Baptist Health,” said Elaine Yao, Managing Director, H2C. “Their leadership in orchestrating a performance turnaround enabled Baptist to achieve a good ratings outcome and successful sale of its bonds. We look forward to working with Baptist as it continues to improve performance.” Email Elaine.