Baylor Scott & White Health plans to issue $550 million in taxable bonds that will be used for constructing new facilities as well as refinancing older debt.
The bonds are expected to be sold next week. Pricing information was not yet available.
In a preliminary offering statement, the Dallas-based system said it plans to use the proceeds to fund and refinance the costs of “developing, constructing and equipping certain health facilities.” About half of the proceeds, or $253.8 million, will be used to pay off earlier series of bonds before their maturity dates.
Baylor is undertaking a number of capital improvement projects. At its flagship hospital, Baylor University Medical Center in Dallas, it is renovating two floors to create a new intensive care unit with private patient rooms. The project includes enlarging the elevator for transporting ICU patients and adding power stations. It also plans to renovate 10 operating rooms to increase their size and make required upgrades to the smoke evacuation system.
Those projects and others will be funded with the bond proceeds.
The debt issuance comes as some larger systems are returning to the bond market after a quiet 2014. Many healthcare providers have curtailed more expensive capital projects in favor of information technology investments that can be funded with shorter-term bank debt.
Moody's assigned an Aa3 rating to the bonds, and Standard & Poor's assigned an AA-. Baylor Scott & White has experienced strong revenue growth thanks to favorable demographics in its Dallas and Temple markets, Moody's said, but its growth strategy likely will necessitate additional capital investments.
The system reported a 2% year-over-year increase in inpatient admissions in fiscal 2014, which ended June 30. Outpatient registrations increased 8.4% year over year.
Its operating surplus increased to $316 million on $5.7 billion in revenue in fiscal 2014 compared with $221.1 million on $5.3 billion in revenue for the prior year.
Baylor Scott & White last month entered into a joint venture agreement with Tenet Healthcare Corp. that will bring together five North Texas hospitals—four from Tenet and one from Baylor. Baylor will be the majority owner of the facilities, but Tenet will continue to manage its own hospitals.
