Grand Forks, North Dakota, sold $150 million in bonds to finance the ongoing construction of a new hospital. The city will loan the bond proceeds to Altru Health System, a nonprofit health care provider in Grand Forks.
The bonds mature between 2026 and 2053, yielding between 3.69% and 5.42%. They received underlying ratings of BBB- from Fitch Ratings and Baa3 from Moody’s Investors Services, and insured ratings of A1 from Moody’s and AA from S&P Global Ratings.
“The ‘BBB-‘ rating continues to reflect the significant escalation in both debt and capital risk that Altru incurred as it resumed construction of its replacement hospital in 2021, after a brief pause in construction due to the pandemic,” according to Fitch.
The bonds will fund completion costs for a new hospital that Altru says will “reimagine” the way it delivers care. Building the hospital has proven to be easier said than done.
Construction began on the project in 2019, with an intended completion in 2022. But it soon paused amid financial woes exacerbated by the COVID-19 pandemic. Construction resumed in fall 2021, with a new completion date of March 2025. Costs for the project, now estimated at $467 million, are about 23% higher than originally budgeted, according to Fitch.
Grand Forks is a city of almost 60,000 people in eastern North Dakota, along the Minnesota border. The bonds are limited obligations of the city, payable by Altru revenue.
BofA Securities, Inc served as underwriter on the issuance, purchasing the bonds for close to par.