CommonSpirit plans $2 billion bond issue amid rush to borrow

COMMONSPIRIT HEALTH’S $2 billion proposed bond financing could make it the latest health system rushing to finish its financing ahead of the November presidential election and market uncertainty that surrounds such monumental events.

The Chicago-based system late last month said it plans to lock in the financing, contingent on market conditions, in the fourth quarter of 2020. Most of the transaction will be refinancing existing debt, but the package will include issuing up to $750 million in new debt that’s a combination of taxable and tax-exempt funds.

Many health systems are issuing new debt or refinancing now given the historically low interest rates. There’s also a rush to get those deals done before the presidential election, as such events tend to trigger market uncertainty, said Ken Gacka, senior director and analytical manager for healthcare ratings at S&P Global Ratings.

“A lot of people just want to get in before all that happens,” he said.

Phoenix-based Banner Health, for example, late last month announced a roughly $600 million issuance to refinance existing bonds.

bond offering is the next step to build on the health system’s 2019 restructuring and refinancing, in which two systems merged to form CommonSpirit under the same credit structure, the health system said in a statement.

“While CommonSpirit currently has solid cash reserves, bond offerings are one important way to provide the organization with long-term committed capital, which is particularly important today given the financial challenges all providers are experiencing as a result of the COVID-19 pandemic,” the system said.

Given CommonSpirit’s size, a $2 billion package isn’t a surprising figure, Gacka said. CommonSpirit’s total debt stood at $14.8 billion as of June 30, 2020, $13.1 billion of which is long-term debt. That’s compared with $13.5 billion in total debt as of June 30, 2019, including $9.2 billion in long-term debt.

“All things considered, it’s not a significant increase in debt,” he said. “It’s mostly refinancing.”

CommonSpirit said in the notice that its plans could still change, and the announcement is not a guarantee.

CommonSpirit’s total debt stood at $14.8 billion as of March 31, up from $13.5 billion as of June 30, 2019.