The California Public Finance Authority issued $342 million in bonds to finance improvements at a hospital in San Diego.
The bonds mature between 2024 and 2035, yielding between 2.4% and 2.78%. They pay interest at 5%. The securities received a rating of AA from S&P Global Ratings and Aa3 from Moody’s Investors Service.
The authority will loan the bond proceeds to Sharp HealthCare, a nonprofit healthcare group based in San Diego.
“The assignment of the Aa3 reflects Sharp HealthCare’s leading market position in San Diego County driven by a well-executed competitive strategy, strong clinical offerings, an integrated health plan, and extensive physician relationships,” Moody’s analysts wrote.
The issuance comes amid challenges across the healthcare industry that have dented profits at nonprofit and for-profit systems alike. These include inflation, labor disputes, shifts in insurance coverage, and continued competition between healthcare groups, according to Moody’s.
“For the time being, Sharp will remain hampered by industry-wide operational headwinds which will drive weaker than historical results for the third consecutive year in 2024,” Moody’s analysts wrote.
The proceeds will help finance four of seven phases for a campus master plan to improve Sharp Memorial Hospital, the largest hospital run by Sharp HealthCare. The plan calls for the expansion of the emergency department by 31 beds and the relocation of six operating room suites among other projects. It is expected to cost almost $1 billion, with a target completion date in 2030.
Sharp HealthCare operates seven hospitals in southern California. The bonds are limited obligations of the authority, payable by a pledge of hospital revenue.
RBC Capital Markets LLC served as lead underwriter on the issuance, purchasing the bonds for more than $398 million. The price reflected a premium of $56 million. Kaufman, Hall & Associates, LLC acted as financial advisor.