Benedictine Health System, a Minnesota-based not-for-profit organization affiliated with the Catholic church, recently obtained $132.4 million in financing arranged by HJ Sims. Historically, the organization and its affiliates were financed on a standalone basis, resulting in 36 separate series of outstanding debt for 19 different borrowers. Plus, the series were held by eight different banks or servicers with disparate terms, covenants and reporting requirements. As such, the board and executive leadership team wanted to restructure its capital framework, change its service mix and invest in improvements at existing campuses, and engaged HJ Sims in August 2020.
Sims built an initial Obligated Group comprised of 21 senior living communities, including 14 in Minnesota and seven in North Dakota. Most of the existing debt was bank debt, so Sims arranged a shorter 20-year amortization period to avoid an extension of the debt’s weight average maturity. Taxable debt was also selected to refinance the debt allocated to the North Dakota communities to avoid using two issuers. That also gave the organization more flexibility in its debt repayment.
Sims solicited a group of commercial lenders to obtain term sheets for the taxable and tax-exempt debt, requesting that the prospective lenders agree to the same terms as the prospective bondholders. Benedictine Health System ultimately chose two lenders with whom they had longstanding relationships. Meanwhile, Sims distributed the long-term, fixed-rate bonds to the public market, reducing the borrower’s average coupon from 3.8% to 3.5%. That enabled Benedictine to borrower an additional $10 million for routine capital expenditures needed across the campuses.
