A Tennessee agency sold $145.1 million in bonds to finance improvements at Vanderbilt University Medical Center (VUMC), to which it is loaning the proceeds from the issuance.
The bonds mature between 2028 and 2033, yielding between 4.16% and 4.37%. They pay interest at 5%. The securities received a rating of A from Fitch Ratings and A from S&P Global Ratings.
The rating reflects “VUMC’s leading market position in high-acuity service lines over a very broad area with expanding reach, excellent reputation as a nationally recognized academic medical center (AMC), and track record of profitability,” Fitch analysts wrote.
The issuance comes amid criticism that nonprofit hospitals receive more in tax breaks than they return to their communities. These hospitals have so-called fair share deficits, measured as the difference between federal, state, and local tax breaks and the value of their community investments.
VUMC, a nonprofit healthcare system primarily operating in Nashville, is one of the worst offenders, according to the Lown Institute, a nonpartisan think tank. The system’s fair-share deficit in 2020 was the third-largest in the United States at $158 million.
VUMC was legally separated from Vanderbilt University in 2016. The bond proceeds will fund construction, remodeling, renovation, and equipping of facilities at VUMC, which owns six hospitals in Tennessee and partially owns two others.
The bonds were sold by the Health and Education Facilities Board of the Metropolitan Government of Nashville and Davidson County, Tennessee. The bonds are limited obligations of the board, secured by payments on the loan from VUMC.
BofA Securities, Inc served as lead underwriter on the issuance, purchasing the bonds for $150.8 million.