Hospitals and health systems seeking capital should monitor and maintain their financial disclosure practices to attract investors. That's according to Robert Yolland, senior vice president for the Franklin Templeton Group, which invests roughly 13% of its $78 million municipal portfolio in healthcare.
Yolland, who described Franklin Templeton as a long-term investor, was joined by an underwriter and financial adviser in a Tuesday afternoon session on capital access at the Healthcare Financial Management Association's Annual National Institute.
In addition to disclosure, Yolland said he believed an opportunity to question healthcare borrower executives to be a valuable way to assess the strength of the management team and a potential investment. Investors consider operating performance and consolidated financial statements for health systems, pension liabilities, swaps and leases, and any short-term debt or letter of credit expirations when making a decision about buying a bond. Analysts with Franklin Templeton also consider a borrower's competitive profile, strategic direction, trends in utilization and payer mix and the local economy. He said the quality of an organization is more difficult to assess.
The current market appears to have given borrowers some leverage to set the borrowing terms. Recent deals for lower-rated borrowers have successfully come to market without a debt service reserve fund, Yolland noted.
Risk in the global economy and the nation's sputtering economy have lowered U.S. Treasury rates as investors seek a safe haven, and municipal rates have followed, said John DiFazio, director of the municipal securities division for Citigroup Global Markets, who described it as a seller's, or borrower's, market.
Yolland said he hoped that borrowers would not take too much advantage of the current market. “We try not to extort you when we have the leverage; we hope that you don't try to extort us when you have the leverage,” he told the crowd.
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