BayCare Health bringing $1.3 billion week of Aug. 19

BayCare Health System, Florida, plans to price $1.3 billion in bonds the week of Aug. 19 through the Hillsborough County Industrial Development Authority.

The authority approved the bonds earlier this month. Bond proceeds will reimburse BayCare for prior capital expenditures, fund future capital projects and pay for capitalized interest and costs of issuance.

The authority set a 6.5% maximum allowed annual interest rate and December 31, 2061, as the latest allowed maturity.

Morgan Stanley (MS) and Barclays (JJCTF) will be the underwriters. Kaufman, Hall & Associates serves as municipal advisor and Bank of New York Mellon (BK) as bond trustee.

Bryant Miller Olive is counsel to the issuer. The counsel to the borrower is Hawkins Delafield and Wood.

The bonds are rated AA by Fitch Ratings with a stable outlook. Moody's Ratings is expected to release a rating Thursday, said Tom Morrison, general counsel for the authority, but it was not available by press time.

BayCare has 15 hospitals, a skilled nursing facility, a long-term care facility, 19 outpatient rehabilitation facilities, 24 diagnostic/imaging centers, 20 urgent care centers and two behavioral health hospitals. It had $5.5 billion in operating revenue in 2023, according to Fitch.

Fitch said BayCare's operating risk assessment and financial profile are solid. BayCare would have strong operations support in a hypothetical stress scenario, according to the rating agency.

BayCare has had earnings before interest, taxes, depreciation and amortization growth of 13% per year over the last five years and revenue growth of 5.8% per year in the same period, Fitch said. In the first six months of 2024 BayCare had a 15.8% EBITDA margin.

Volume growth, a shift toward commercial payors, a focused effort to reduce observation stays and lengths of stay and easing of labor cost pressures have contributed to BayCare's successful operational performance, Fitch added.

At the end of 2023 BayCare had a cash to adjusted debt ratio of 501%, cash on hand of about 573 days and debt service coverage of 9.7 times. The system would remain healthy even in a Fitch stress scenario, Fitch said.

BayCare has the leading inpatient market share of 32.7% in the greater Tampa-St. Petersburg region. While BayCare has meaningful competition, Fitch believes it will maintain or grow its market position given its investment in facilities, expansion of clinical services and continued increase in access points.

In June, BayCare transferred $4 billion of assets to Trinity Health Corp. as part of a termination of a joint operating agreement, the rating agency noted. Fitch views the new corporate structure as a credit positive.