John Muir Health Completes Series A,B and C Refunding Transactions
posted on November 17, 2016

 

NEW YORK — Hammond Hanlon Camp LLC ("H2C"), a healthcare-focused investment banking firm, served as the exclusive financial advisor and placement agent to John Muir Health (“JMH”), based in Walnut Creek, California, in connection with the issuance of JMH’s $231.8 million Series 2016A Refunding Bonds and its $95.7 million Series 2016B&C variable rate bank direct placements.

 

JMH retained H2C in the early spring of 2016 to help JMH evaluate its options for a potential refunding of the Series 2006A Bonds and refinancing of the 2008A&C Variable Rate Demand Bonds (“VRDBs”).  H2C designed a plan of finance that, through a refunding of all Series 2006 and 2008 Bonds, generated present value (“PV”) savings, near term cash flow savings, restructured overall amortization, and eliminated daily / weekly put risk.  H2C executed the plan of finance with two parallel processes over the course of four months.

 

Proceeds of the Series 2016A Bonds were used to current refund JMH’s Series 2006A Bonds.  H2C ran a request for proposal (“RFP”) process to select an underwriter, created a comprehensive rating agency presentation and helped draft the offering documents, including Appendix A.  JMH achieved approximately $41.5 million in PV savings (20.7% of refunded par) on the 2016A refunding.  Incremental to the refunding, JMH was also able to realize a portion of the PV savings up front by issuing $50 million in additional debt to help finance new strategic projects.  H2C’s rating agency experience also helped JMH earn a positive outlook on its credit rating (A1, stable / A+, positive).

 

Proceeds of the 2016B&C Bonds were used to refinance JMH’s existing 2008A&C Bonds.  H2C ran a competitive process to select a lender, sending out 25 RFPs and receiving 11 proposals, resulting in a 9.0x oversubscription of the par amount needed.  H2C also negotiated the financial and legal terms of the loan and bond documents.  H2C secured a 10-year and an 8-year direct placement from two lenders at favorable spreads with financial covenants that mirrored the Master Trust Indenture (“MTI”), and incurred minimal additional non-financial covenants.  Through the direct placement refinancing, JMH eliminated short term put risk from the VRDBs and extended the underlying maturity on the bonds from 20 to 30 years.

 

As part of both transactions, H2C also worked with JMH’s existing investors and credit providers to amend its MTI in order to give JMH more flexibility with strategic decisions and modernize its debt service coverage calculations.  In total, H2C structured the 2016A,B and C Bonds such that JMH was able to reduce its maximum annual debt service from $64.7 million to $32.3 million.  The restructured amortization also generated near term cash flow savings of $54 million from 2017–2024, with level debt service thereafter.

 

“H2C worked with JMH’s management to create the plan of finance and worked diligently to complete the transaction on a short timeline to take advantage of historically low interest rates.  H2C’s execution of the financing allowed JMH to achieve an amazing outcome that saved us money and increased the organization’s financial and operational flexibility,” stated Christian Pass, Chief Financial Officer of John Muir Health.  

 

“H2C is extremely pleased to have assisted JMH with the Series 2016A,B and C refunding transactions.  The plan of finance allowed JMH to lower its cost of capital, realize PV and cash flow savings, reduce risk on the balance sheet, and obtain favorable debt terms,” said Elaine Yao, Managing Director at Hammond Hanlon Camp LLC.  Email Elaine