The Kaiser Family Foundation hopes to raise its visibility by building offices in Washington, four blocks from the White House. At the same time, it will gain some new stakeholders in the form of bond investors.
The not-for-profit healthcare research organization is planning its first-ever bond issue to finance the building, slated to open in January 2003. The facility will replace leased offices and will contain exhibition space, a conference center and a broadcast studio-amenities that will expose the foundation's work to a broader audience.
The $42 million variable-rate issue is expected to be marketed this week. The lead underwriter is Shattuck Hammond Partners.
Chief Financial Officer Bruce Madding says the move to issue public debt was "merely an economic decision." He says the foundation expects to pay low interest rates of 4.5% to 5%. He adds that the growth of the foundation, which now has annual revenue of about $60 million, helped make a bond deal possible.
The foundation's debt has been deemed safer than virtually all hospital debt. The bonds were assigned a top rating of AAA by New York-based Standard & Poor's.
S&P praised the foundation's high liquidity, financial flexibility and sustained growth. In addition, the foundation could gain more flexibility if it changes its tax designation from a grant-making foundation to a private operating foundation, says Terry Goode, a director at S&P. Doing so would give the foundation more leeway to lower expenditures if necessary to devote more money to repayment of the bonds.
The foundation is considering altering its tax status to reflect the changing nature of its work during the past decade. The foundation is running more of its own programs and is contracting with other organizations to perform research, spokeswoman Lauren Asher says.
The organization, based in Menlo Park, Calif., was founded in 1948. %