ABOUT PROHEALTH CARE
As a regional specialty and primary care health network, ProHealth Care offers a full spectrum of integrated services at Waukesha Memorial Hospital, Oconomowoc Memorial Hospital, the Rehabilitation Hospital of Wisconsin, ProHealth Care Medical Associates clinics, AngelsGrace Hospice, ProHealth Home Care and Hospice, West Wood Health & Fitness Center, and Regency Senior Communities. ProHealth Care is a not-for-profit organization and the largest healthcare provider in Waukesha County. ProHealth Care is a full member of “abouthealth,” a statewide network that includes seven prominent health systems which, collectively, provide access to care for about 90 percent of Wisconsin’s population. The partnership was developed to build upon and advance the clinical quality, efficiency and superior customer experience shared among the organizations, and will contract with insurance companies on behalf of all of the member organizations.
ABOUT HAMMOND HANLON CAMP LLC
Hammond Hanlon Camp LLC (“H2C”) is an independent strategic advisory and investment banking firm committed to providing superior advice as a trusted advisor to healthcare organizations throughout the United States. H2C’s professionals have a long track record of success in healthcare mergers & acquisitions, capital markets, real estate and restructuring transactions, acting as lead advisors on hundreds of transactions representing billions of dollars in value. Hammond Hanlon Camp LLC offers securities through its wholly-owned subsidiary H2C Securities Inc., member FINRA/SIPC. For more information, go to h2c.com.
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Hammond Hanlon Camp LLC Advises ProHealth Care on Financing Transactions Totaling $338 Million
posted on July 21, 2015
CHICAGO – Hammond Hanlon Camp LLC (“H2C”), a healthcare-focused investment banking firm, served as the exclusive financial advisor to ProHealth Care (“ProHealth” or “PHC”), based in Waukesha, Wisconsin, in connection with the private placement of $204,800,000 Series 2014 A&B Variable Rate Revenue Bonds and the public issuance of $133,630,000 Series 2015 Fixed Rate Revenue Bonds. The proceeds of the issues were used to fund a portion of the costs of two new facilities, as described below, to refund three outstanding series of variable rate demand bonds and advance refund one series of fixed rate revenue bonds.
Through a comprehensive strategic planning process, ProHealth had identified the need to develop two new healthcare facilities: 1) a state-of-the-art ambulatory center that would offer primary care and diagnostic services as well as integrate outpatient oncology services across the system, and 2) a freestanding emergency department that would ensure outlying communities more convenient access to critical services. Given the size of the projects - $130 million - and ProHealth’s desire to preserve its strong balance sheet and credit profile (A1/A+ ratings), PHC desired to conduct a comprehensive review of its existing debt portfolio in conjunction with the evaluation of the best funding strategy for the projects. H2C was retained in early 2014 to develop a Strategic Capital Plan (“Plan”) and to assist management with the development of a long range financial forecast that would guide certain aspects of the Plan.
To develop the Strategic Capital Plan, H2C worked with ProHealth management and Finance Committee to understand the system’s objectives and concerns, and to provide information regarding the capital markets and credit rating trends. Based on these discussions, the financial forecast and the existing debt portfolio, H2C developed several recommendations to ensure funding for PHC’s projects, optimize the system’s capital structure and preserve its strong credit position, including:
Fund approximately half of the total project costs with bond proceeds, use cash reserves for the remainder and concurrently refund all outstanding VRDBs, using direct placement bonds to achieve longer commitments, reduce risks and improve operating flexibility relative to LOC terms
Advance refund outstanding fixed rate bonds that, although not currently callable, could be refunded for savings based upon the decline in MMD to unprecedented, low levels
Through an RFP process that included pre-defined, comprehensive terms, H2C secured credit commitments totaling almost one billion dollars for the private placement transaction, and ProHealth selected two well-capitalized national banks as the ideal credit providers and partners for ProHealth’s long-term banking needs. H2C ran a similarly competitive process to select an underwriter, with a particular focus on the firm’s ability to move quickly to market in order to capture extremely favorable interest rates.
Based on the outlook for the market, the finance team decided to close the two series of private placements ahead of the public issuance. The delay produced a better outcome on the advance refunding, as lower interest rates -- combined with a restructuring of principal amortization to better match asset lives -- produced present value savings of $27.7 MM (21.9% of the par amount refunded) and a reduction in maximum annual debt service from $31.2 MM to $26.7 MM -- enabling PHC to effortlessly absorb the debt service requirements from the new debt.
In the course of the financing process, ProHealth completed its annual rating update with Moody’s and S&P. Although the amount of leverage was high for the rating level and PHC intended to add $70MM of new debt, PHC’s solid market position, impressive financial performance and strong balance sheet allowed S&P and Moody’s to affirm ProHealth’s A+/A1 rating. Ultimately the financing allowed ProHealth to increase its operating margin and maintain its strong balance sheet while adding new debt to fund important new expansion projects.
“The team at H2C did an exemplary job of working with management and our Finance Committee to develop a sound finance plan and then negotiating on our behalf to achieve results beyond our expectations. Their leadership on this effort was instrumental in allowing us to advance to market quickly and to enable management to focus on other important priorities, stated Ron Farr, Chief Financial Officer of ProHealth Care.
“H2C is extremely pleased to have had the opportunity to assist ProHealth Care in taking advantage of the favorable capital markets to secure low cost capital for its new projects, while also preserving important operating flexibility in a dynamic healthcare environment,” said Victoria Poindexter, Principal at Hammond Hanlon Camp LLC.
"The team at H2C did an exemplary job... developing a sound finance plan and then negotiating on our behalf to achieve results beyond our expectations."
- Ron Farr
CFO, ProHealth Care
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