🔒New St. Francis parent refinancing $246M in debt

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Trinity Health Corp., the Michigan-based hospital operator that acquired St. Francis Hospital and Medical Center and its related entities last month, is headed to the bond market.

Trinity has asked the Connecticut Health and Educational Facilities Authority (CHEFA) to sell up to $260 million worth of tax-free bonds to restructure St. Francis' long-term debt.

If CHEFA approves, Trinity is aiming for a January bond sale, St. Francis Chief Compliance Officer Jennifer Schneider said.

On Oct. 1, when the Trinity-St. Francis acquisition closed, Trinity paid off St. Francis' $246 million in long-term debt accumulated from a number of previous capital projects, including construction of its John T. O'Connell Tower in 2011 and a 10-story patient care tower built in the 1990s, said St. Francis Chief Financial Officer David Bittner.

Now, St. Francis owes Trinity the debt, but at a lower, fixed interest rate and over a 30-year term, Bittner said. The $260 million authorization would include issuance costs.

CHEFA is a quasi-public state agency that issues tax-exempt bonds on behalf of nonprofit institutions, including hospitals.

The St. Francis debt transaction is part of a larger Trinity transaction involving refinancings and new money totaling approximately $800 million in debt, related to Trinity's healthcare holdings across the country, Schneider said.

Overall, Bittner said transferring its long-term debt from banks to Trinity will provide St. Francis more financial flexibility.

It eliminates previous loan covenants that required St. Francis to keep a certain amount of cash reserves. Trinity has also helped St. Francis reduce a separate $43 million liability tied to a previous interest-rate swap, further strengthening St. Francis' balance sheet.

And as a $15.8 billion company with an 'AA-' credit rating, Trinity can do better in the bond market than St. Francis could have on its own, Bittner added.

The debt restructuring will be in addition to the $275 million Trinity has pledged to invest in its New England region over the next five years for infrastructure development, new health service lines, mergers and acquisitions, and doctor recruitment.

St. Francis will lead Trinity Health's New England region, which will also include Sisters of Providence Health System in Springfield, Mass. The system is also expected to include Johnson Memorial Hospital and Saint Mary’s Hospital, pending regulatory approval.

— Matt Pilon

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