BANNER HEALTH 2021 - SUMMARY LETTER.PDF
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A P R O F E S S I O N A L C O R P O R A T I O N 3200 North Central Avenue, Suite 1600 Phoenix, Arizona 85012 P 602.440.4800 F 602.257.9582 www.rcalaw.com 4846983.2 09/09/21 John J. Fries Direct Line: 602-440-4819 E-mail: jfries@rcalaw.com September 9, 2021 To: Board of Supervisors Board of Directors Maricopa County, Arizona The Industrial Development Authority of The County of Maricopa Re: Not to Exceed $305,000,000 The Industrial Development Authority of the County of Maricopa Revenue Bonds (Banner Health) Series 2021 Ladies and Gentlemen: At the meeting of The Industrial Development Authority of the County of Maricopa (the “Authority”) on September 14, 2021, the Authority Board will be asked to grant approval to the financing for Banner Health, an Arizona nonprofit corporation, as Obligated Group Representative under the Master Indenture for Banner Health; Banner-University Medical Center Tucson Campus, LLC, an Arizona limited liability company; Banner-University Medical Center South Campus, LLC, an Arizona limited liability company; and Wyoming Medical Center, Inc., a Wyoming nonprofit corporation (collectively, the “Obligated Group”); and adopt a resolution authorizing the issuance and sale of the bonds as described above (the “2021 Bonds”). This letter provides a summary review of the proposed transaction. THE AUTHORITY The Authority is an Arizona nonprofit corporation, formed with the permission of Maricopa County and incorporated under and pursuant to the Arizona Industrial Development Financing Act, Title 35, Chapter 5, Arizona Revised Statutes, as amended (the “Act”), and the Authority is designated by law to be a political subdivision of the State of Arizona. THE APPLICANT/BORROWER Banner Health is designated as a 501(c)(3) organization under the Internal Revenue Code of 1986, as amended (the “Code”). Banner Health, either directly or through affiliates, currently operates hospital, medical and healthcare facilities in Maricopa, Pima and Pinal Counties, Arizona, and in California, Colorado, Wyoming, Nebraska, Nevada and Alaska. The Authority has previously issued bonds for the benefit of Banner Health in 2016 (approximately $800 million); in 2017 (approximately $460,000 million); and in 2019 (approximately $540 million). Banner Health is current on all of its obligations under those bonds. Board of Supervisors Maricopa County, Arizona Board of Directors of The Industrial Development Authority of the County of Maricopa September 9, 2021 Page 2 THE PROJECTS Banner Health is developing a plan of finance for new financing initially estimated at approximately $665,000,000 under various fixed and floating rate instruments and commercial paper, including a portion to be financed through the Authority. Banner Health, as Obligated Group Representative, (“Borrower”) has requested that the Authority issue its 2021 Bonds in one or more series or subseries from time to time, as taxable or tax-exempt debt, or a combination of taxable and tax-exempt debt, in an aggregate principal amount not to exceed $305,000,000, the proceeds of which will be loaned to the Borrower to pay the costs of (1) financing a taxable loan of the Borrower, the proceeds of which were used to finance the acquisition by the Borrower of Banner Wyoming Medical Center located in Casper, Wyoming; and (2) refunding all or a portion of the Arizona Health Facilities Authority Revenue Bonds (Banner Health), Series 2015B (the “Prior Bonds”). The proceeds of the Prior Bonds were used by the Borrower as follows: (a) to acquire Banner–University Medical Center Tucson located in Tucson, Arizona; (b) to acquire Banner—University Medical Center North Campus located in Tucson, Arizona; (c) to acquire Banner Administrative Offices, located in Tucson, Arizona; (d) to acquire Banner Payson Medical Center located in Payson, Arizona; and (e) to construct a car parking garage at Banner- University Medical Center Phoenix located in Phoenix, Arizona. The facilities to be refinanced with the proceeds of the 2021 Bonds are collectively referred to as the “Projects”. The Borrower is currently reviewing whether it can effectuate a rate conversion under the Prior Bonds. If the Borrower can implement the rate conversion, the amount of the 2021 Bonds issued will be reduced by the amount designated to refund the Prior Bonds. NOTIFICATION TO ARIZONA ATTORNEY GENERAL As required by the provisions of Arizona Revised Statutes, Section 35-721.F, the Authority will notify the Arizona Attorney General of the Authority’s intention to issue the 2021 Bonds. PUBLIC HEARING Bond Counsel has determined that a public hearing pursuant to Section 147(f) of the Internal Revenue Code of 1986, as amended (the “Code”), relating to the issuance of the 2021 Bonds, will not be required. ALLOCATION FOR TAX EXEMPT FINANCING No allocation of the Arizona “volume cap” is required for the issuance of the 2021 Bonds as this financing is for a nonprofit 501(c)(3) entity. Board of Supervisors Maricopa County, Arizona Board of Directors of The Industrial Development Authority of the County of Maricopa September 9, 2021 Page 3 FINANCING PARTICIPANTS The major participants in the financing are as follows: Issuer: The Industrial Development Authority of the County of Maricopa Issuer Counsel: Ryley Carlock & Applewhite, a professional corporation Applicant/Borrower: Banner Health Bond Underwriters: Morgan Stanley, Citi, JP Morgan and Goldman Sachs Bond Counsel: Hawkins, Delafield & Wood LLP Bond Trustee The Bank of New York Mellon Trust Company Applicant/Borrower Counsel: Lewis Roca Rothgerber & Christie LLP Bond Underwriter Counsel: Dentons US LLP Borrower’s Financial Advisor: Kaufman Hall & Associates Master Trustee: U.S. Bank National Association PRINCIPAL FINANCING DOCUMENTS Document Parties Multiple Bond Indentures Issuer and Trustee Loan Agreement Issuer and Borrower Official Statements Borrower and Bond Underwriter One or more Bond Purchase Agreements Borrower, Issuer and Bond Underwriter PLAN OF FINANCING The 2021 Bonds will be issued pursuant to the Bond Indenture(s), and the proceeds received from the sale of the Bonds will be loaned to Banner Health as Obligated Group Representative pursuant to the Loan Agreement(s) and applied, together with other available moneys, to finance the Projects as described above. Board of Supervisors Maricopa County, Arizona Board of Directors of The Industrial Development Authority of the County of Maricopa September 9, 2021 Page 4 The 2021 Bonds will be offered for sale by the Underwriters utilizing the Official Statements and the 2021 Bonds will be purchased by the Underwriters under and in accordance with the terms and provisions of the Bond Purchase Agreements. It is anticipated the 2021 Bonds will bear interest at rates dependent upon the scheduled maturity dates, will be subject to early redemption as provided for in the Bond Indentures and will have an investment grade rating issued by one or more recognized national rating agencies. BENEFIT WITHIN THE STATE Under A.R.S. 35-706.A.16, the Authority has the power to issue bonds for a project located in whole or in part outside Arizona (the “State”), provided that the Authority’s board of directors determines that the exercise of such powers will provide a benefit within this State. The issuance of the 2021 Bonds and the making of a loan to the Borrower for the purpose of refinancing the Projects and refunding the Prior Bonds will provide a benefit in the State for the following reasons: (i) the Borrower maintains its corporate headquarters in Phoenix, Arizona; (ii) the Borrower owns and operates hospital, medical and health care facilities in different locations both in the State and in other states; (iii) the Borrower is one of the major employers in the State; (iv) the Borrower is one of the largest providers of hospital, medical and health care services in the State; and (v) the Borrower typically uses tax exempt or taxable bond financing on a system-wide rather than a project basis to finance and refinance capital expenditures to its facilities, wherever located. The issuance of the 2021 Bonds and the making of a loan to the Borrower for the purpose of refinancing the Projects and refunding the Prior Bonds is in furtherance of the purposes of the Authority under the Act and will provide an economic benefit to the Borrower by enabling the Borrower to finance and refinance capital expenditures at the Borrower’s health care facilities within and outside the State. AUTHORITY APPROVAL At the Authority Board meeting on September 14, 2021, the Authority Board will be asked to grant approval to the application for financing and adopt a resolution authorizing the issuance and sale of the 2021 Bonds. A copy of the resolution to be adopted by the Authority Board is included with this letter. NO LIABILITY ON THE COUNTY OF MARICOPA Under the provisions of A.R.S. § 35-742, the County of Maricopa shall not in any event be liable for the payment of the principal or interest on the 2021 Bonds of the Authority or for the performance by the Authority of any of its obligations with respect to the 2021 Bonds nor shall any agreements or obligations of the Authority constitute an Board of Supervisors Maricopa County, Arizona Board of Directors of The Industrial Development Authority of the County of Maricopa September 9, 2021 Page 5 indebtedness of the County of Maricopa within the meaning of any constitutional or statutory provision whatsoever. BOARD OF SUPERVISORS APPROVAL The Maricopa County Board of Supervisors is requested, at its meeting on October 6, 2021, to act as required by law to adopt a resolution approving the proceedings of the Authority for the issuance of the 2021 Bonds. TRANSACTION CLOSING Assuming the required approvals are received, it is anticipated that the 2021 Bonds will be issued in late October or early November, 2021. LEGAL COUNSEL RECOMMENDATION As counsel to the Authority, we have reviewed drafts of the principal financing documents, and have been advised that these documents are now in substantially final form. Based upon our review of such and our review of the proceedings of the Authority to date relating to the proposed issuance of the 2021 Bonds, we believe the financing documents and proceedings are in substantial conformance with the policies and guidelines of both the Authority and the Maricopa County Board of Supervisors and that the Resolution presented to the Board of Supervisors is in form and substance acceptable for the Maricopa County Board of Supervisors to adopt.