Dana-Farber mega-deal pays for cancer center and refunding

The Dana-Farber Cancer Institute had a lot of ambitions for its $1.4 billion deal on Thursday.

The issuance was intended to restructure nearly all of the institute's outstanding debt and fund half of the construction of a new hospital tower.

And the deal delivered. The deal's complex structure ? and Dana-Farber's solid reputation and business model ? helped pull it through a challenging market.

"We're pleased to announce the successful pricing today of the Massachusetts Development Finance Agency Revenue Bonds, Dana-Farber Cancer Institute Issues, Series Q and R. The bonds, when issued, will help fund Dana-Farber's 300-bed inpatient cancer hospital, a major expansion of cancer care capacity for patients across New England," said Dana-Farber's Chief Finance Officer, Michael L. Reney, in a statement. "The bond proceeds will also support information systems infrastructure and other capital investments essential to Dana-Farber's mission and will refinance prior indebtedness."

The first tranche of the deal, $1.304 billion of Series Q, saw yields ranging from 3.57% for 5% coupons maturing in 2036 to 4.84% for 5.5% coupons in 2056.

Series Q includes a $300 million bullet maturity in 2037; that maturity will be 21% of Dana-Farber's outstanding debt once its private debt is refinanced, Reney said in the investor presentation for the deal.

The second tranche of bonds, Series R, consisted of $91.98 million of forward-delivery bonds. Yields for the bonds ranged from 3.78% for bonds maturing in 2037 to 4.60% for maturities in 2046.

Both series are callable in June 2036. Goldman Sachs (GS) was the manager for the deal, and BofA Securities, J.P. Morgan, Truist Securities and Ramirez & Co. were co-managers. PFM was the municipal advisor and Hinckley Allen was the counsel.

In addition to building the new tower, the bonds will refund nearly all of Dana-Farber's outstanding debt. After the deal is settled, Dana-Farber's debt will be entirely fixed-rate. Debt service for the new bonds will be deferred until 2032.

The deal provoked mixed reactions from two rating agencies, though they ended in alignment.

Moody's Ratings downgraded Dana-Farmer to A2 from A1, but lifted its outlook to stable from negative at the new rating.

Moody's downgraded Dana-Farber because of the magnitude of the new debt, analyst Beth Wexler said, but the agency views the refunding component of the deal as a net positive.

The refunding portion of the deal creates "a lower-risk debt structure" for Dana-Farber, according to Wexler. "Our rating action, to an A2 from an A1, was largely related to the amount of total leverage that would be outstanding, and not related to the operating performance, or the expectation of operating performance going forward."

S&P Global Ratings lifted its on Dana-Farber's A rating to stable from negative.

"The outlook change reflects Dana-Farber's improved overall financial profile, particularly rising unrestricted reserves and extremely light leverage, which, along with a healthy philanthropy outlook beyond initial expectations, has created a sufficient cushion to allow Dana-Farber to issue this additional debt at the current rating level," S&P analysts wrote in the report.

Whitney Pearce Fitts, director of municipal portfolio management at Appleton, said the deal was well-received by the market, considering its size.

"But I think this deal was appropriately, appropriately priced and appropriately subscribed for it," Fitts said. "Not every investor can take a forward settle bond," she added, but the large size and complex structure meant the deal "had a little bit for everyone."

The $300 million, 11-year bullet maturity aligned with market appetites, Fitts said. Issuance has been heavy in the five-to-12-year maturities, so placing the bullet on the edge of that range was shrewd, she said.

Dana-Farber touts that its forthcoming ten-floor, 300-bed tower will be New England's only freestanding hospital devoted solely to cancer. It will be operated by Dana-Farber, Beth Israel Deaconess Medical Center, and Harvard Medical Faculty Physicians. Dana-Farber's partnership with BIDMC, formalized last year, marked a major change for both organizations and was part of BIDMC's own billion-dollar-plus bond sale in 2025.

The total project will cost $1.816 billion, according to Patrick McCormick, Dana-Farber's senior vice president of hospital transformation, in the investor presentation. Dana-Farber will pay for $1.4 billion of the project, while BIDMC will pay $331 million.

Dana-Farber began demolishing an existing structure to make room for the tower in March. Demolition is slated for completion in November, and construction for the new structure will commence. Dana-Farber hopes the tower will begin serving patients in the third quarter of 2031.

In its revenue stability, reputation, and fundraising, Dana-Farber is distinct from most of America's healthcare networks, Wexler said.

Medicare comprised half of Dana-Farber's gross patient service revenues in FY 2025, according to the investor presentation, while Medicaid has consistently made up 8% of the payor mix for the past three years.

Dana-Farber is an NCI-designated comprehensive prospective payment system, Wexler said, which means the institute is reimbursed based on "reasonable costs" rather than the fixed rates that Medicare typically pays.

Dana-Farber contributed to 56% of all new cancer drug and cell therapies approved by the FDA from 2020-2024, according to the investor presentation. It received $706.7 million of funding for its research in fiscal 2025; 27% of that was from federal grants and contracts.

Although federal research grants have been imperiled at many higher education institutions, that hasn't been a problem for hospitals like Dana-Farber, Wexler said. Still, the hospital is monitoring that risk, she said.

Dana-Farber also achieves an "exceptional" level of fundraising, Wexler said, with a large breadth of philanthropy.

"For a typical organization, a foundational-level campaign would typically happen once every decade or so," Wexler said. "This is a different level."

The institute plans to fund $800 million of its new cancer center through philanthropy, and in February, it announced its largest-ever gift.

Dana-Farber benefits from a "sound reputation," according to S&P analyst Cynthia Keller, with a "regional, national, and international draw for patients. "Dana-Farber's financial results have consistently met and often exceed our expectations," Keller said.

That large draw for patients, Wexler said, also powers Dana-Farber's fundraising success.

"They really do attract very grateful donors, grateful past patients," Wexler said, "people who really believe in the core mission of curing cancer."