University of Wisconsin Hospitals and Clinics Authority (27814MF:US), the school’s main medical teaching facility, is selling $262.7 million in revenue bonds, the biggest deal from an issuer in the state this year.
This week’s sale comes after Moody’s Investors Service on Feb. 15 raised the authority’s rating one step to Aa3, fourth- highest, citing its “renowned clinical reputation and unique role as Wisconsin’s only academic medical center.” Standard & Poor’s ranks the debt A+, fifth-highest.
The authority runs the University of Wisconsin Hospital and Clinics in Madison, the primary teaching hospital for the university’s School of Medicine and Public Health. It also serves parts of Illinois, Iowa and Minnesota. In-patient admissions grew 2 percent in fiscal 2012 while operating cash flow almost doubled to $150.7 million from $86.2 million in 2009, according to Moody’s.
Most of the proceeds from this week’s offering -- $225 million -- will go toward projects such as an acute-care facility and an addition to a children’s hospital, bond documents say. Some of the funds will be used to retire debt and pay a $2.6 million fee to Goldman Sachs Group Inc. (GS:US) to terminate an interest-rate swap.
Moody’s increase in the authority’s credit score follows a record-setting year for downgrades in the U.S. nonprofit healthcare sector, the company said in a Feb. 12 report. In 2012, Moody’s lowered ratings on $20 billion in such debt, the most for one year since it began tracking ranking changes for individual market sectors in 1995.
Hospital bonds have returned about 7.4 percent over the past year, including price appreciation and interest payments, compared with 4.9 percent for the $3.7 trillion municipal- securities market, according to Barclays Capital index data.
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