Rochester, Minnesota-based Mayo Clinic heads into the market with a $516 million new money and refunding deal bolstered by a balance sheet at record levels, according to the system’s chief financial officer.
The system will offer 35-year bonds in two series with one for $265 million selling through the city of Rochester as conduit and another for $251 million selling through Phoenix, Arizona’s Industrial Development Authority. Mayo also intends to privately place $200 million of new money, taxable securities by the end of May at an interest rate of 3.26% and a final maturity in 2058.
The system generated $15.7 billion in annual revenue last year up 14% from 2020 when volumes were impacted by the pandemic. Its cash and investments grew to $18.1 billion from $14.4 billion buoyed by a 27.3% return on its long-term investments that generated $2.34 billion, further fueling its recovery from early pandemic hits.
Operating income of $1.21 billion translated into a 7.7% margin last year. The results incorporate $97 million of employee appreciation rewards. Donations and gifts rose to $783 million last year from $527 million in 2019. The 2021 numbers don’t include any
“Balance sheet strength is at record levels. Revenue and volumes increased despite the
BofA Securities is the lead bookrunner and Goldman Sachs is the bookrunning senior manager. Kaufman Hall is advising on the deal. Pricing is slated for Thursday.
Mayo will use new money to pay for projects at its Minnesota and Arizona campuses and current refund 2012 bonds. The system also operates an academic campus in Jacksonville, Florida, and a network of community hospitals in Minnesota and Wisconsin.
The new sale will bring the system’s debt to $4.7 billion. Ahead of the sale, Moody’s Investors Service affirmed its Aa2 rating and S&P Global Ratings affirmed its AA. Both assign a stable outlook.
S&P said the system benefits from a global reputation and its ability to attract international patients.
“We believe Mayo Clinic has enterprise characteristics that are consistent with a higher rating, but we would not consider a higher rating or positive outlook unless it is able to maintain balance sheet strength and performance consistent with those of years such as 2021 and 2019,” S&P said. Future borrowing plans “likely reduce upward rating potential over the next few years.”
The system has approved a $432 million expansion of its Florida facilities, $353 million expansion for new towers at its La Crosse, Wisconsin and Mankato, Minnesota, facilities and a 50%, $201 million expansion of its Rochester proton beam facility.
“Mayo Clinic has large capital plans and will make investments in a number of ventures over the next several years that will likely depress margins, but could provide significant returns in later years,” Moody’s said.
The ratings and the system’s reputation also benefit from research activities.
“During the onset of the pandemic, Mayo Clinic was an early and leading provider of laboratory testing for COVID infections and has been a leader in developing and testing therapies to treat the disease,” Moody’s said.
