Northwell to offer $1 billion in bonds to finance growth

Northwell Health is slated to offer $1 billion in bonds next week, with the majority of the funds going to its continued expansion, the New York-based hospital system said Tuesday.

Northwell's offering is the latest in a series of $1 billion deals that hospital systems have undertaken this year. Approximately $600 million of Northwell's offering has been earmarked to build out facilities in existing markets and expand its reach.

Giant Kaiser Permanente in Oakland, Calif., raised $4.4 billion through a series of three bond offerings in May.

Big investor-owned chain Community Health Systems grew a $700 million debt offering to $900 million on strong investor demand, also in May.

Even smaller systems, such as MetroHealth in Cleveland, have been able to fetch big money in the bond markets at historically low interest rates. Competition for MetroHealth's $945.7 million offering this year dropped its rate to under 5%.

Northwell will use $400 million of its planned $1 billion offering next week to retire existing debt and the bigger share for growth and facilities upgrades, said Northwell spokesman Terry Lynam.

Among a laundry list of projects, Northwell intends to modernize maternity facilities at its Staten Island University and Huntington hospitals and improve the cardiac catherization and electrophysiology lab at Peconic Bay Medical Center in Riverhead, N.Y.

Additionally, Northwell plans to begin work on an advanced surgical pavilion at North Shore University Hospital in Manhasset, N.Y. and a campus upgrade at Southside Hospital in Bay Shore, N.Y.

The upgrade includes the second-phase expansion of the emergency department, an intensive-care unit, electrophysiology lab and other programs, Lynam said.

"Also, significant funds will be allocated to routine infrastructure upgrades, routing equipment replacements as well as ongoing IT investments and joint ventures investments focused on expanding ambulatory networks," Lynam said.

Northwell has been growing through an aggressive acquisitions strategy that has seen the not-for-profit system execute three hospital mergers, the acquisition of several large physician practices and the opening of urgent-care centers across the region over the past two years.

Peconic Bay Medical Center, which is a target for bond spending, is one of the three hospitals acquired.

Northwell is one of the nation's largest hospital systems with 21 hospitals and 2016 revenue of $9.9 billion.

Moody's Investors Service has assigned a prime A3 rating to the $1 billion offering, making it suitable for institutional investors to buy.