The brand new WMCHealth Critical Care Tower is targeted to open within the second quarter of 2026.
WMCHealth
When selling a credit with a reasonably modest balance sheet, especially one facing the challenge of operating a healthcare system in Latest York State, an important thing is to inform a story.
The “Hudson Valley cannot exist without this tertiary [and quaternary] academic medical center,” said Mike Quinn, a managing director at BofA Securities and the lead banker for the deal to finance a recent state-of-the-art patient tower on Westchester Medical Center’s essential campus in Valhalla, Latest York.
The $286.95 million Series 2023 financing, priced through the Westchester County Local Development Corp., won the Health Care Financing category of The Bond Buyer’s 2024 Deal of the Yr awards.
“This deal got here to be when it became apparent that constructing this recent critical care, advanced care bed tower was a strategic imperative for the medical center,” said John Morgan, senior vp of economic operations and interim CFO at Westchester Medical Center Health Network, or WMCHealth, the hospital’s parent organization.
“It made numerous sense,” Morgan said. “It will increase our volumes. It will be accretive to our bottom line. It will be a financially helpful project.”
The 62,000-square-foot tower, set to cost $220 million, will rise five stories upon completion, with a goal date of the second quarter of 2026.
Adjoining to WMC’s essential tower, the tower will house 128 private, state-of-the-art patient rooms.
Together with funding the brand new critical care tower, dubbed the “Tower to Heal,” the proceeds were used to finance a young of WMCHealth’s Series 2020 taxable bonds at a “significant discount to par, which enabled the organization to de-leverage,” based on the award nominating statement. Around $90 million of the outstanding bonds was tendered.
After selecting a team, certainly one of the primary steps was securing rankings.
The deal received Kroll Bond Rating Agency’s first direct rating of a healthcare system, securing a BBB-minus rating.
“We gave credit to the market position, the size of operations, the concentrate on the tertiary and quaternary care piece, the connection to Latest York State, and the essential services that that is the hospital,” said Doug Kilcommons, a managing director of public finance at KBRA.
This balanced against the financial weakness around liquidity and questions around whether WMCHealth could meet its $220 million price tag on account of the fundraising component, he noted.
WMCHealth, despite significant recent leverage for the patient tower, had its BBB-minus rating from S&P affirmed and the outlook revised to stable from negative.
“The outlook revision reflects our view of continued money flow stability and improvement over the outlook period,” S&P Global Rankings credit analyst Anne Cosgrove said in an announcement on the time.
From there, the manager leadership team of WMCHealth took the show on the road.
“We said to the client, ‘No one tells your story higher than you do. Why don’t we hold an in-person road show?'” Quinn said as WMCHealth met with over 20 institutional funds in Boston; Princeton, Latest Jersey; and Malvern, Pennsylvania.
On the day of the transaction, there have been only a few hiccups, with all the pieces running easily and professionally, Morgan said.
The deal generated participation from 81 different institutional investors, and the bonds were oversubscribed, reducing yields by 10 to 22 basis points for all maturities.
“Orders were flying in, the rates were good that we made a choice on the fly that we were going to upsize the transaction by $30 million,” Morgan said.
To do this, aboard meeting convened to approve the upsized deal, he noted.
“So inside quarter-hour, we had a quorum, and by telephone, we had an executive committee meeting of the board and upsized the deal,” Morgan said.
WMCHealth used an annual premium structure from Assured Guaranty, with insurance getting used across most maturities to bring down the all-in cost, the nominating statement said.
The Assured wrap brought the rankings to AA-plus from KBRA and AA from S&P.
“Assured Guaranty was pleased to partner with Westchester Medical Center Health Network to assist bring this unique and essential transaction to market,” Leigh Nader, managing director of healthcare and better education at Assured, said in an email. “We were capable of assist in optimizing the structure of the transaction and providing the issuer with significant savings.”
BofA Securities was lead manager on the deal, and Citigroup, Siebert Williams Shank and Academy Securities were co-managers.
Lamont Financial Services Corp. was the municipal advisor and Katten Muchin Rosenman LLP was the bond counsel.
The deal was obligatory for WMC, an important provider for the community with a tutorial medical center and the region’s only advanced care and Level 1 Trauma Center that serves greater than three million people within the Hudson Valley region, northern Latest Jersey and lower Connecticut.
A regional referral center, WMC focuses on advanced care and has received, on average, greater than 10,000 patient transfers per 12 months from other hospitals.
“It became apparent that constructing this recent critical care, advanced care bed tower was a strategic imperative,” said John Morgan, senior vp of economic operations and interim CFO at WMCHealth.
Emergency room visits average around 50,000 annually, and the hospital’s case mix index, a measure of patient acuity, is certainly one of the very best within the country.
The project is a “capstone” on major construction for WMCHealth for the subsequent seven to 10 years, Morgan said.
“It completes the needed work and the constructing that needed to be done on this campus,” he said.
“After we issue bonds, there are two moments of triumph: once we do the groundbreaking and once we do the ribbon cutting,” said Joan McDonald, chair of the Westchester County Local Development Corp. and director of operations for the Westchester County government.
Construction broke ground on the $220 million project — funded by the proceeds from the deal and an “aggressive” fundraising campaign — in July, Morgan said.
“Projects like this send a message, to the financial community specifically, that not-for-profit corporations, hospitals and universities are a particularly essential partner, each from providing services to residents, but additionally as an economic driver, from the development jobs which are created to the extra employees that the brand new facilities will employ,” McDonald said.
“This project is just not nearly bricks and mortar; it’s about our unwavering commitment to the health and well-being of our community,” said Michael D. Israel, president and CEO of WMCHealth, in a press release. “The Critical Care Tower will stand as a testament to our continued leadership, providing ultramodern facilities for critical care that may impact lives for years to come back.”