This article is part of a series spotlighting The Bond Buyer’s ten 2020 Deal of the Year award winners, running from December 9 through 15. One of these honorees will be chosen as our national Deal of the Year at a virtual event taking place December 16. For more information on the Deal of the Year winners and how to obtain a complimentary pass for the virtual event, click
The U.S. economy was severely hampered when non-essential businesses were shuttered in March, and hospitals were besieged by coronavirus patients and the loss of elective surgery patients.
The bond market was stymied, with much uncertainty about the disease, the economy, and how long lockdowns would be. Few deals were being priced in March and into April.
It was under these conditions that on April 8 J.P. Morgan and Ponder & Co., with RBC Capital Markets as joint lead, brought to market the $1.16 billion Bon Secours Mercy Health financing, our choice for the Health Care Deal of the Year.
The deal helped pave the way for the reopening of the capital markets for not-for-profit health systems amid the pandemic. Other issuers involved in the deal included Allen County, Ohio, the South Carolina Jobs-Economic Development Authority, and the Virginia Small Business Financing Authority.
The deal consisted of three series: $683.895 million, $87.38 million of with a five-year put, and $389.68 million of taxable bonds. With rates volatile at the time, the managers employed “a rate lock for a portion of its taxable issuance that helped de-risk the transaction.”
“Across all three series, BSMH had nearly $4 billion in orders with up to 9 times oversubscription for certain maturities leading to spread tightening across the curve,” the DOTY submission form noted.
The deal was the first deal larger than $500 million by a non-profit health system following the outbreak of the coronavirus. “BSMH was also the first health system to hold a live investor call since the outbreak of the virus, fielding many questions from investors surrounding the impact of COVID-19,” according to the submission.
Bon Secours also disclosed the existence of the pandemic and what it meant in its offering statement, “setting the standard for disclosure during the pandemic.”
After this deal hit the market, it opened a path for “many other NFP health systems across the country to access the capital markets to gain financial security and flexibility, and ultimately support their ability to care for patients and combat the virus outbreak.”
The healthcare provider used some of the proceeds for long-term financing to acquire three hospitals from Community Health Systems and to invest more in Roper St. Francis. “By coming to market within six months of the closing of both the acquisition of the Community Health Systems Hospital and the increased stake in Roper St. Francis, BSMH was able to largely finance these acquisitions using tax-exempt debt which provided considerable economic benefit.”
Bon Secours transitioned over three years “from two regional health systems with approximately $4 billion in annual revenue, to one of the five largest Catholic health care systems in the U.S. … with annual run rate revenue of approximately $10 billion,” the nominating statement says. “During this time period of robust growth, BSMH’s prudent management team has successfully integrated acquisitions, diversified its business model through strategic and innovative investments and opportunistically accessed the capital markets yielding strong financial performance and an upward rating trajectory.”
