Not-for-profit healthcare borrowers are enjoying more options to borrow and at better rates.
Prominent health systems, including the Mayo Clinic and Dignity Health, entered the taxable public bond market for the first time in 2012. Taxable markets offered favorable rates compared with tax-exempt bonds—a more common and typically less costly option for not-for-profits, say healthcare finance executives. Taxable debt also lacks the regulation and oversight of tax-exempt deals.
Taxable rates eroded as the year moved to a close, but not before major deals such as Catholic Health Initiative's $1.5 billion taxable bond issuance. “They're building war chests,” says David Cyganowski, a managing director with Kaufman Hall, a healthcare financial advisory firm.