Hammond Hanlon Camp LLC Advises Mercy Iowa City on $41.8 Million Refinancing, Sale of Medical Office Portfolio
posted on March 22, 2019
 

NEW YORK — Hammond Hanlon Camp LLC (“H2C”), a healthcare-focused strategic advisory and investment banking firm, through its wholly-owned subsidiary H2C Securities Inc. (“H2C”), served as the exclusive financial advisor to Mercy Iowa City (“Mercy”) on a year-long, multiphase process to restructure and strengthen the system’s balance sheet. The series of transactions reduced overall debt while adding unrestricted liquidity and committed fixed- rate capital, leading in part to a rating upgrade from Moody’s Investors Service:

 

  • On May 20, 2018, Mercy refinanced its Series 2008 Variable Rate Demand Bonds and terminated an interest-rate swap by issuing the Series 2018 Bonds, a fixed-rate private placement with a 17-year commitment, and a five-year call option.

  • On June 21, 2018, Mercy closed the sale/leaseback of its UDM medical office building.

  • On Feb. 28, 2019, Mercy closed the sale/leaseback of a portfolio of six medical office and clinic buildings. 

 

Moody’s downgraded Mercy from Baa2 to B1 (negative outlook) in August 2017, which resulted in a violation of the ratings covenant under the Letter of Credit Agreement that supported the Series 2008 VRDBs. H2C began working with Mercy on a strategy to refinance the debt and strengthen Mercy’s capital position. As financial advisor, H2C’s primary goal was to secure new long-term committed capital to refinance Mercy’s Series 2008 VRDBs, which would limit liquidity risk for the health system. A secondary objective was to maintain refinancing flexibility to take advantage of future ratings upgrades when operating performance improved further.  

 

H2C conducted a competitive credit selection process and worked closely with management to highlight the critical steps Mercy had taken to improve the system’s operating performance and financial position. After discussions with more than 30 potential credit providers, Mercy ultimately selected a bond fund that could provide the permanent capital and refinancing flexibility.

 

In addition, H2C advised Mercy on two separate real estate transactions comprising seven medical office buildings totaling over 93,000 square feet.  H2C conducted a competitive process that included contacting national, regional, and local investors and resulted in numerous competitive acquisition proposals for the sale/lease back transaction. The two transactions generated approximately $28 million, which Mercy used to reduce overall debt levels and create liquidity to use toward strategic initiatives.  

 

The cumulative impact of the turnaround steps taken by Mercy’s management and the transactions executed by H2C resulted in a rating upgrade from by Moody’s from B1 (negative outlook) to Ba2 (positive outlook). Moody’s cited the elimination of the technical default, added stability, and permanent pay down of debt as factors contributing to the upgrade.

 

“H2C ran a competitive credit selection process that met Mercy Iowa City’s goals of a long-term commitment and call flexibility while swiftly executing the sale of its medical office,” said Rich Bayman, Principal, H2C. “Our efforts not only positioned Mercy Iowa City for a credit upgrade, but also provided the Hospital with strong financial footing.” Email Rich. 

 

“H2C’s work with Mercy Iowa City positioned our organization for a credit upgrade and protected our ability to meet the healthcare needs of the communities we serve,” says Doug Davenport, CFO, Mercy. “We’re grateful to H2C for helping us achieve our objectives in such a short period of time.”
 

NEW YORK

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New York, NY 10022
212.257.4500

 

ATLANTA

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Atlanta, GA 30305
404.937.1350

 

CHICAGO

311 South Wacker Drive
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Chicago, IL 60606
312.508.4200

 

ABOUT MERCY IOWA CITY

Mercy Iowa City is a 234-bed acute care hospital and regional referral center that draws patients from throughout southeast Iowa. The Hospital’s major services include heart and vascular care, including a cardiac catheterization lab; orthopedic care; maternity care; cancer care; digestive services; general surgery; wound and vein care; and 24-hour emergency care. Mercy Iowa City’s medical staff is comprised of more than 225 physicians representing all major medical specialties and most subspecialties.


Located near downtown Iowa City, the Mercy Iowa City campus includes the Hospital and a cancer center.

 

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 and related companies throughout the United States.  H2C’s professionals have a long track record of success in healthcare mergers and 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, visit h2c.com.

 

MEDIA CONTACT

Kelly T. Duong
Hammond Hanlon Camp LLC
858.242.4810
kduong@h2c.com

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4655 Executive Drive

Suite 280
San Diego, CA 92121
858.242.4800

 

H2C’s work with Mercy Iowa City positioned our organization for a credit upgrade and protected our ability to meet the healthcare needs of the communities we serve.

 

- Doug Davenport

  CFO, Mercy Iowa City