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Indianapolis Issuing for Its Safety Net Hospital

DEC 31, 2012 11:04am ET
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Indianapolis will start 2013 by floating $42.4 million of bonds in the final debt issue for a massive $734 million public safety net hospital that is set to open by the end of the year.

The city is expected to sell the double-A rated lease revenue bonds the week of Jan. 17.

It's been two years since the Indianapolis Local Public Improvement Bond Bank—the city's borrowing arm—issued debt for Wishard Hospital, which remains on budget and on track to open by its goal of December 2013.

Wishard is Marion County's only public acute-care hospital. The new 327-bed hospital and adjacent buildings culminate years of planning by officials from the hospital and Indianapolis to replace the existing Wishard, which includes some buildings that are nearly 100 years old.

Moody's Investors Service rates the bonds Aa1 and Fitch Ratings rates them AA. Analysts based the ratings on the strong economy of triple-A rated Indianapolis as well as the essential nature of the new facilities and the strong support for the project signaled in 2009, when voters approved by an 85% margin a bond referendum authorizing the issuance of $703 million for the replacement facilities.

In 2010, the bond bank priced $672 million of bonds for the project in two series. The deals included $376 million of direct-payment Build America Bonds.

A piece of the tax-exempt bonds with a 2022 maturity and 5% coupon were yielding 2.4% in the most recent trading, according to the Municipal Securities Rulemaking Board EMMA website. A piece of the taxable BABs with a 2040 maturity were yielding 4.4% on Nov. 28, and BABs with a 2030 maturity and 5.85% coupon were yielding 4.1% in trading last week, according to EMMA.

All bonds for the project feature the full faith, credit, and taxing power of the Marion County Health and Hospital Corp., the county's health care division, which has taxing power over an area that includes Indianapolis. The authority is required to make debt payments from a dedicated property tax fund if hospital revenue falls short.

Ratings analysts said challenges include the hospital's weak recent financial performance—it reported a $236 million operating loss in 2011—as well as vulnerability to industrywide pressures from Medicaid and Medicare reimbursement declines.

"Wishard's qualitative performance measures are strong, while weak financial operations reflect in part the very high 38% of patients with no form of insurance or government subsidy," Fitch wrote in its recent ratings report.

The bonds are secured by a debt service reserve fund financed with proceeds from the two 2010 bond deals.
In a recent local television interview, Mayor Greg Ballard said the project would help the city maintain its upward economic momentum.

Officials have so far raised $75 million for the project, and the project will be renamed the Sidney and Lois Eskenazi Hospital and Eskenazi Health in recognition of a $40 million gift last year.

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