The South Carolina Jobs-Economic Development Authority issued $1.9 billion in bonds to finance a health-care network’s acquisition of three hospitals in the state.
The bonds mature between 2031 and 2054, yielding between 4.02% and 4.68%. They received a rating of AA- from Fitch Ratings, A1 from Moody’s Investors Service and A+ from S&P Global Ratings. The rating marked a downgrade from Moody’s.
The authority will lend the bond proceeds to Novant Health, a health-care network operating primarily in South Carolina and North Carolina.
The issuance follows Novant’s purchase in February of three smaller hospitals in South Carolina. The purchases were funded by $2.4 billion worth of debt, which is being refinanced by the bond issuance.
“The downgrade to A1 reflects the approximate doubling of debt incurred to finance the acquisition,” Moody’s analysts wrote. They added that the rating also reflects Novant’s “fundamental strengths,” including “good and stable market share in its legacy North Carolina markets and cash flow diversity across several distinct metro areas, including the newly acquired South Carolina assets.”
The bond proceeds will fund Novant Health’s purchase of Hilton Head Hospital, Coastal Carolina Hospital, and East Cooper Medical Center. All three hospitals are in the state’s southeast.
Novant is planning a smaller, $320 million acquisition of two hospitals in North Carolina. That deal hit a snag in January, when the Federal Trade Commission sued the hospital system on antitrust grounds.
Novant Health is one of the largest hospital systems in the U.S. southeast. It operates 18 medical centers in the Carolinas and employs almost 2,000 doctors. The bonds are limited obligations of the South Carolina Jobs-Economic Development Authority, which is a conduit issuer of the state, and unsecured general obligations of Novant Health, payable by its revenue. The network recorded $7.5 billion in operating revenue last fiscal year.
J.P. Morgan Securities LLC served as lead underwriter on the issuance, purchasing the bonds for more than $2 billion. The price reflected a premium of $148.2 million. Kaufman, Hall & Associates, LLC acted as financial advisor.