Orange County Health Authority to Launch $1.4 Billion Hospital Revenue Bonds for Orlando Health

Orange County, Florida Health Facilities Authority to Issue $1.4 Billion Hospital Revenue Bonds

Who, What, Where, When, Why

The Orange County, Florida Health Facilities Authority (OCHFA) is set to offer $1.4 billion in hospital revenue bonds for Orlando Health during the week of January 13. This bond sale will include both taxable and tax-exempt debt aimed at refinancing existing taxable bonds.

Orlando Health previously raised funds through the issuance of Series 2024 bonds with short-term maturities, which were sold on a taxable basis to facilitate the purchase of hospitals located in Alabama and Florida. At that time, Orlando Health did not possess sufficient information about these assets to qualify for tax-exempt bonds, according to John Miller, the senior vice president of finance at Orlando Health.

The decision to conduct this bond sale in a consolidated deal is expected to lead to savings in bond counsel and other associated fees, despite the hospitals being located in two separate states, Miller explained.

Details of the Bond Sale

OCHFA anticipates that the taxable segment of the upcoming bond issuance will not exceed $400 million. Financial institutions JPMorgan and Morgan Stanley have been designated as underwriters for the bond sale. Additionally, Kaufman Hall will act as the municipal advisor while Chapman Cutler serves as the bond counsel. The specific maturities for the bonds are still under discussion and have not been finalized.

Later this month, ratings agencies Fitch Ratings and S&P Global Ratings are expected to issue ratings for the bonds. Existing revenue bonds issued by Orlando Health have received a commendable rating of A-plus with a positive outlook from S&P and AA-minus with a stable outlook from Fitch.

Orlando Health’s Financial Footprint

Operating out of Orlando, Florida, Orlando Health manages assets worth $12 billion and oversees a diverse network that includes medical centers, hospitals, urgent care facilities, nursing homes, and physician practices across Florida, Alabama, and Puerto Rico.

According to analysts from Kaufman Hall and Moody’s Ratings, the healthcare sector is expected to witness increased borrowing throughout the year as financial conditions evolve. The general consensus among financial experts is that total issuance within the healthcare sector could reach around $500 billion, although some analysts predict potentially higher volumes due to anticipated changes in tax exemptions.

Market Trends and Challenges

Amid these developments, municipal mutual funds recently experienced outflows, with investors pulling $316.2 million for the week ending December 11, marking the end of 23 weeks of inflows. Conversely, high-yield municipal bond funds saw an inflow of $192.3 million.

Concerns regarding the ongoing delays in a legal case have been raised, with implications for constitutional matters affecting bondholders. In response to these dynamics, the Municipal Securities Rulemaking Board (MSRB) is seeking industry feedback on proposed changes to key regulatory rules.

As part of future considerations, there are suggestions from financial insiders that the state may need to resort to issuing short-term debt to address expenses related to Hurricane Helene.