The Rhode Island Health and Educational Building Corporation sold $300 million in bonds to finance capital improvements at a group of hospitals.
The bonds mature between 2034 and 2054, yielding between 3.2% and 4.29%. They received a rating of BBB+ from S&P Global Ratings and BBB+ from Fitch Ratings, which revised its outlook to stable from negative.
The corporation will loan the bond proceeds to the Lifespan Obligated Group, which operates five hospitals and other medical practices in Rhode Island and southeastern Massachusetts.
The rating “is based on Lifespan’s still adequate liquidity position for the rating category, despite balance sheet losses last year, gradually improving operating results,” and its leading market share position in Rhode Island, Fitch analysts wrote. They added that the stable outlook reflects their expectation that Lifespan will return to stronger operating margins.
The issuance comes amid closer cooperation between Lifespan and Brown University. The two organizations signed a letter of understanding last October and are negotiating an agreement by which Brown would restate its academic affiliation with Lifespan, according to the official statement accompanying the sale of the bonds.
Fitch noted that Lifespan has been prone to underinvestment recently, though an agreement with Brown could change that. “Once a final agreement is in place, it is expected that Brown will provide capital for Lifespan’s strategic investments over a period of several years,” Fitch analysts said, writing that they view such an agreement “favorably.”
The bond proceeds will fund upgrades at the hospitals operated by Lifespan, including three teaching hospitals affiliated with Brown.
The bonds are secured by Lifespan revenue.
Morgan Stanley & Co LLC served as lead underwriter on the issuance, purchasing the bonds for $331.2 million. The price reflected a premium of $32.8 million and a discount of $1.6 million. Acacia Financial Group, Inc acted as financial advisor.