CHICAGO – Northwestern Memorial Healthcare and University of Chicago Medical Center are planning deals totaling about $425 million.
The deals were approved at conduit issuer Illinois Finance Authority's September meeting.
Northwestern's up to $175 million deal will convert debt originally issued in 2011 by the then-newly formed Cadence Health.
Northwestern and Cadence merged in 2014 with Northwestern guaranteeing Cadence's $378 million of debt.
The combined system established an integrated academic healthcare delivery system with more than 60 sites in Chicago and its suburbs, including four hospitals, more than 4,000 physicians, and 17,600 employees.
In addition to the Cadence facilities, NMHC is the parent of Northwestern Memorial Hospital in downtown Chicago, Northwestern Medicine Lake Forest Hospital in Lake Forest far north of Chicago, and Northwestern Medical Group.
Cadence Health was formed in 2011 when Central DuPage Hospital in the far west Chicago suburb of Winfield merged with Delnor Hospital located far west of Chicago in Geneva.
The bonds will remain in a floating-rate mode and be directly purchased by U.S. Bank and Bank of America Public Capital Corp,., and Wells Fargo Bank.
Northwestern carries ratings of Aa2 from Moody's Investors Service and AA-plus from S&P Global Ratings.
Kaufman Hall & Associates LLC is advising Northwestern. Chapman and Cutler LLP is bond counsel.
The 2011 sale refunded $58 million of Delnor debt and $127 million of Central DuPage's debt. JPMorgan Chase Bank purchased the unrated bonds from the systems, which then were still in the process of merging their finances.
University of Chicago Medical Center will refund 2009 bonds and reimburse itself for recent capital expenditures with its upcoming issue.
The bonds are secured by a security interest in the unrestricted receivables of the obligated group. The system's existing ratings are Aa3 from Moody's Investors Service and AA-minus from Fitch Ratings and S&P.
JPMorgan, Citi, and Loop Capital Markets LLC are underwriting the transaction that will be publicly offered. Melio & Co. is advising the hospital and bond counsel is Chapman and Cutler.
Fitch affirmed the medical center's AA-minus rating and stable outlook in May. The facility benefits form its integral relationship with University of Chicago, a solid market position, and a strong clinical reputation.
"Its relationship with the university and focus on research differentiates it in a highly competitive and consolidating market," Fitch wrote.
UCMC currently operates 629 beds in four hospitals all located on its south side of Chicago campus with total revenue of $1.5 billion.
IFA executive director Christopher Meister also offered a recap for board members of the results of the authority's recent $500 million sale of state revolving fund bonds.
The true interest cost for the triple-A bonds was 2.32%. The maturities with a 5% coupon landed at a 35 basis point spread to the Municipal Market Data's top-rated benchmark and 58 basis points over on the maturities that offered a 4% coupon.
The deal received $1.6 billion of orders with 26 new investors for the credit, allowing the finance team to bring down spreads. "This appears to be the best performance, on a relative basis, of any recent Illinois credit," Meister's presentation said.
Most Illinois-based credits face some yield penalties due to the state' budget impasse and pension woes with those with an Illinois name or exposure to delayed state payments paying the steepest fines.
