Texas Children's Hospital, which was hit with rating downgrades this summer in the wake of operating losses, is moving ahead with an approximately $222 million revenue bond sale this week.
The tax-exempt, fixed-rate debt issued through the Harris County Cultural Education Facilities Finance Corp. is scheduled to price Thursday. Proceeds are earmarked for capital projects and equipment and the purchase and cancellation of $79 million of Series 2019B bonds.
Ahead of the sale,
Moody's Ratings affirmed its Aa2 rating and stable outlook in July. Texas Children's, the nation's largest pediatric integrated delivery system, had nearly $1 billion of long-term debt outstanding as of June 30.
In an investor presentation for the deal, hospital Chief Financial Officer Weldon Gage said several steps are being taken to reduce expenses by about $160 million.
"We've put in place a plan of action to mitigate the financial challenges we faced this fiscal year and our balance sheet remains strong," he said. "We believe our history of executing on our strategic initiatives, the depth and breadth of our outstanding clinical services, and our track record of market share leadership all combined to position the system for long-term success."
In an Aug. 6 Federal Worker Adjustment and Retraining Notification Act notice to the Texas Workforce Commission, the hospital said "changing business needs" will lead to the permanent layoff of 997 workers at its Houston location in October, November, and June.
Gage said membership in the Texas Children's Health Plan, which offers coverage to children and pregnant women through Medicaid and other programs, has stabilized after dropping about 30% with the end of the pandemic-related public health emergency.
Days cash on hand for the system, which includes three hospitals in the Houston area and a new facility in Austin, has fallen from 330 days in fiscal 2021 to 232 days in fiscal 2023 and 203 days as of June 30, according to the investor presentation.
The upcoming bond issue's underwriting team led by RBC Capital Markets includes TD Securities and Loop Capital Markets. Bracewell and Cantu Harden Montoya are co-bond counsel and Kaufman, Hall & Associates is the financial advisor.
