With $60 million of new debt, Touro Infirmary is preparing to put the finishing touches on New Orleans' first continuing-care retirement campus.
Touro recently became the sole corporate member of a not-for-profit nursing home in Orleans Parish, a 10-minute ride from the hospital campus. It plans to plunk $24 million into new construction: a 120-bed facility replacing the existing nursing home and a 60-unit assisted-living facility. The nursing home also runs a 60-bed independent-living unit.
"It's part of our mission to provide a full continuum of healthcare in the market," says Suzanne Haggard, Touro's vice president and chief financial officer. "This is just extending our market into a different type of service."
The balance of Touro's bond issue will finance a new hospital wing and routine capital expenditures.
Touro's deal, which closed May 25, is one of 221 new healthcare bond issues to hit the market in the first six months of 1999. Nationally, providers raised $9.6 billion in tax-free capital from January to June, according to Securities Data Corp., a Newark, N.J.-based firm that tracks financial data.
About half of that-$4.5 billion over 109 deals-was sold from April to June.
Bond issuance has cooled significantly from last year's scorching first half. Sparked by rock-bottom interest rates, healthcare providers offered more bond issues in the first six months of 1998-337, to be precise-and raised more money-roughly $17.5 billion-than in any comparable January-to-June period.
This year's healthcare bond volume appears to be on par with other past years, though. In the first half of 1997, for instance, Securities Data counted 193 deals worth $9 billion.
So what's new in 1999? In the hospital sector, new money is pouring into major renovations, says Bill Mates, a managing director at Fairmount Capital Advisors, a Philadelphia-based financial advisory firm. The projects involve spiffing up and reconfiguring space, as opposed to adding capacity, he explains. "When the dust settles, there aren't going to be any additional beds."
More than $4.5 billion of the $9.6 billion raised in the first half of 1999 represented pure "new money" deals, according to Securities Data. The rest represented refundings or some combination of either refundings or refinancings and new money.
This year's healthcare financing activities show another trend: the tightening of underwriting criteria and an increase in fees by credit enhancers. As a percentage of total debt, many more deals were sold in the first half of 1999 without bond insurance. Only $4.4 billion of tax-exempt healthcare debt, or 46% of bond volume during the period, carried bond insurance. A year ago, $12.5 billion, or 71% of total volume in the six-month period, was sweetened by insurance guaranties.