A Michigan nonprofit healthcare system authorized the sale of up to $300 million in taxable commercial paper notes for general corporate purposes.
The notes, to be sold by Corewell Health, mature not more than nine months after the date of issue. They received a rating of P-1 from Moody’s Investors Service and A-1+ from S&P Global Ratings.
“Assignment of the P-1 reflects Corewell Health’s long-term Aa3 rating and the organization’s strong treasury management and liquidity sufficiency and composition of daily liquid assets that provide for about 3.0x coverage based on the full authorized amount of the program ($300 million),” Moody’s analysts wrote.
The issuance follows a Corewell proposal to raze existing buildings in downtown Grand Rapids to develop new housing for medical residents and fellows. Corewell said the plan, which includes accompanying parking structures and is estimated to cost $100 million, will attract more young physicians to western Michigan.
The proposal faced fierce opposition from commissioners and residents who argued that parking lots undermine the city’s efforts to encourage public transportation. The Grand Rapids Planning Commission tabled the request in October.
Corewell initially intends to sell $73 million in notes to repay existing debt. If the notes fund such repayment, they will not increase the health system’s outstanding debt. If Corewell sells the maximum allowed under the authorization, its outstanding debt would increase by 10%.
Corewell Health was formed last year by the merger of two Michigan hospital systems: Beaumont Health and Spectrum Health. The combined system operates 21 hospitals, primarily in western and southeastern Michigan.
The bonds are general obligations of Corewell Health.
J.P. Morgan Securities LLC and Morgan Stanley & Co LLC will serve as initial dealers for the notes.