Blog: Mayo's credit is good here

The Mayo Clinic entered the taxable public debt market for the first time last week and borrowed $300 million at a cost comparable to tax-exempt bonds but with less hassle.

Rick Haeflinger, assistant treasurer and investment officer for the Rochester, Minn., health system, said the price in taxable markets was competitive with tax-exempt markets and direct placement debt, which has emerged as another alternative to the more regulated municipal bond markets.

Haeflinger said the attractive rates were not the only reason for Mayo to wade into the taxable public market. The health system bypassed paperwork required to issue municipal bonds and won't have to comply with Internal Revenue Service oversight of tax-exempt debt, he said. Tax-exempt bonds must be used for a tax-exempt purpose and borrowers must track use of buildings constructed with tax-exempt financing until the bonds are paid off.

The taxable bonds, which must be paid back over 31 years, were issued with a yield and coupon of 3.774%, he said.

Taxable debt can be used with greater flexibility than tax-exempt bonds and the $300 million will be used to finance capital and operating needs of Mayo, he said. The system's capital plans include plans to spend $700 million a year for five years.

You can follow Melanie Evans on Twitter: @MHmevans.