CHI to Issue $1.5 Billion in Taxable Debt to Support National Initiatives, Strategic Growth and Quality Strategies

CHI to Issue $1.5 Billion in Taxable Debt to Support National Initiatives, Strategic Growth and Quality Strategies

<0> Catholic Health InitiativesMichael Romano, 303-383-2720National Director, Media Relations </0>

Catholic Health Initiatives, one of the nation’s largest nonprofit health systems, will issue approximately $1.5 billion in taxable bonds to finance a wide array of strategic initiatives, including virtual technologies, physician integration and partnerships and alliances in key areas across the country to strengthen local and regional networks of care.

It is the largest bond issue in the history of Englewood, Colo.-based CHI, which operates 76 hospitals and other health care facilities in 19 states, and also represents one of the largest taxable bonds ever issued by a nonprofit health care organization.

“The proceeds will allow this organization to truly fulfill its strategic goals to improve and expand health care in every community it serves,” said Dean Swindle, CHI’s executive vice president for business services and chief financial officer. “It provides the flexibility we need to take advantage of future opportunities in a constantly changing health care environment.”

This is the first time that CHI has issued long-term, fixed-rate taxable bonds, which currently offer interest rates at historically low levels. Taxable bonds also can be issued more quickly through the market than most tax-exempt bonds, providing streamlined access to capital for both nonprofit and for-profit business lines and services.

“We consider this an essential investment in our future,” said Kevin Lofton, CHI’s president and CEO since August of 2003. “This infusion of capital enables us to support the ambitious strategic plans we have developed to better serve our communities, improve the health of the people we serve, strengthen CHI through expanded capabilities, and continue our disciplined growth strategies.”

Despite CHI’s solid financial results and future plans for strategic growth, the large bond issue resulted in a decline in its credit ratings – Fitch Ratings, from AA to AA-, with stable outlook; Standard & Poor’s, from AA to AA-, with stable outlook; and Moody’s Investors Service, from AA to AA-, with stable outlook.

“We considered this downgrade a possibility,” said Swindle. “It’s part of dealing with a large issuance of debt in a difficult economy that is made even more volatile by the uncertainty over health reform. This is a fairly frequent occurrence for health systems over the last year or so. CHI still possesses a very strong rating from all three ratings agencies and solid prospects for the future.

“This will not have an impact on CHI’s financial outlook,” he added. “We believe the ratings will improve as we realize our strategies over the coming years.”

In the 2012 fiscal year, CHI achieved a 3.7% operating margin before restructuring.

Swindle said the proceeds will provide funding for strategic initiatives and quality improvements in many of the markets served by CHI, which is the nation’s second-largest faith-based health system. The organization boasts a diverse geographic footprint, operating in markets around the nation -- including Tacoma-Seattle, Wash.; Omaha, Neb.; Des Moines, Iowa; Little Rock, Ark.; and Chattanooga, Tenn., as well as across the states of Kentucky, Nebraska and North Dakota. Part of the bond issue will be used to help support the transition of Omaha-based Alegent-Creighton Health, once a joint-operating agreement partner of CHI and Immanuel, to full sponsorship by CHI. That transaction is expected to close by Nov. 1.

The proceeds will underwrite continued growth through mergers, acquisitions and joint ventures as CHI creates new partnerships, improving care and reducing costs by developing clinically integrated networks. CHI recently signed a letter of intent with PeaceHealth, Vancouver, Wash., to create an integrated, 16-hospital network in Washington, Oregon and Alaska.

“This will help us accomplish what we have set out to do for the future – to create a clinically integrated health care system that is second-to-none in quality, efficiency and lower costs,” Swindle said.

: Catholic Health Initiatives is a national nonprofit health system with headquarters in Englewood, Colo. The faith-based system operates in 19 states and includes 76 hospitals; 40 long-term care, assisted- and residential-living facilities; two community health-services organizations; two accredited nursing colleges; and home health agencies. In fiscal year 2012, CHI provided more than $715 million in charity care and community benefit, including services for the poor, free clinics, education and research. CHI, with total annual revenues of nearly $10 billion, is the nation's second-largest Catholic health care system.