New York-Presbyterian Hospital has joined a small group of not-for-profit health systems to secure long-term financing with bonds that won't mature for 100 years.
The hospital system offered $250 million in century bonds with an all-in yield of 4.76% as part of an $850 million bond offering this week that also included 20-year and 40-year bonds.
All in all, 36 investors were interested in the 100-year bonds, and NYP Chief Financial Officer Phyllis R. Lantos said the offering produced approximately $4 billion in demand as investors saw value in the investments.
“We're pleased with how the market saw the brand,” Lantos said. “Ultimately I think this deal shows how much confidence investors have in us as an institution.”
Lantos said the hospital plans to use the funds to refinance old debt as well as help integrate regional hospitals into its network. Some of the money will also go toward a new ambulatory care center at New York Methodist Hospital in Brooklyn.
Moody's Investor Service gave the bond issuance an Aa3 rating because of the subordination of the bonds to existing senior secured debt and the control the Federal Housing Authority has over certain business decisions. The analysts also noted that New York-Presbyterian has a prominent position in the market and a strong brand, warranting an Aa3 rating for the issuer. Cleveland Clinic was the only other hospital named as securing bonds.
Century bonds are quite rare, and most issuers are colleges or universities, due to their reputations for longevity. New York-Presbyterian merged two centuries-old institutions—the New York Hospital and the Presbyterian Hospital in the City of New York—in January 1998.
“A 100-year bond is smart for them because they get to leverage their good name and lock in a super low rate for a really long time,” said Allen Fisher, managing director and global head of healthcare banking at MUFG.
In September 2014, Cleveland Clinic became the first not-for-profit health system to finance long-term projects with a century bond.
