Not-for-profit hospital bond issuance jumped in 2015 in what could be a sign that the acute care sector is finally returning to the debt markets after a long absence.
According to the HFA Partners hospital database, not-for-profit acute care hospitals sold $18 billion in fixed rate revenue bonds to the public in 2015, 50% more than the $12 billion sold in 2014.
These figures do not include private placements or bank placements and variable-rate or tax-supported issues.
The higher issuance volumes are attributed in large part to a spike in refundings as rates continue to hover near record lows and more existing bond issues become currently callable.
The Municipal Market Data 30-year "AAA" benchmark index averaged 3.36% in 2015 compared to 3.01% in 2014.
Average issue size grew to $126 million, up 24% from $102 million last year.
Average credit quality improved with A- and better issues making up 80% of issues compared to 72% in 2014.
Last week, we commented for Modern Healthcare on the long awaited Fed rate hike and shared our expectations that the 0.25% increase in the fed funds rate is unlikely to curb borrowing in the near term, and may actually provide an incentive for hospitals to pull the trigger on funding large projects while rates are still low.
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