Loma Linda University Health has a long history of miracles, and we have just been blessed with another one.
As you know, we have been preparing for more than five years to build a new hospital. This requires considerable preparation — organizationally, politically, financially, and in design and construction planning. While we are deep in preparation prior to our groundbreaking event May 22, none of this can happen without confirmed financial plans.
Two weeks ago, the day before we had to know, CHFFA (the California Health Facilities Financing Authority) confirmed that our state bond funding of $165 million was available for the Children’s Hospital. That same week, the Centers for Medicare and Medicaid Services agreed that we could maintain separate licensure for Children’s Hospital. Additionally, we signed the construction contract with McCarthy for building the new adult and children’s hospital towers.
Each of these was a critical step absolutely essential before going to the bond market with a credible story.
The final requirement was the bond financing itself for the balance of the funds we needed. Much preparation has gone into this effort over the past several years. Last week Kerry Heinrich, Kevin Lang and Angela Lalas did the “road show,” meeting potential investors in New York, Philadelphia, Boston, Chicago, San Francisco and Los Angeles. These investors needed to have confidence in our future before they would buy our bonds. This is despite our “junk bond” rating — which was recently revised from negative to stable outlook, but still ranked low. By all accounts, the trip went well with good questions and a positive attitude.
But the real test was Wednesday morning, when the actual bond offering was put on the trading table. To our amazement and blessing, over $4.7 billion was put forward in solicitation to purchase our bonds — five times more than we needed. Interest rates in the bond market are also at a 50-year low, something we could not have imagined or planned.
Within two hours, with this level of desire for our bonds, we sold our entire bond offering at an average interest rate of 4.84 percent. This will save us around $135 million in interest alone, as we had originally budgeted the bonds at a 6.5 percent interest rate.
Once again, our God has smiled on His institution. Huge kudos go to Kerry, Kevin, Angela and the many others who played less visible but crucial roles in this process.
Now we move forward with construction. We still need to meet our Vision 2020 philanthropy goal of $360 million (we are more than halfway there) and gain operational efficiencies in our health care enterprises. But this critical financial step is now behind us.
Join us for the groundbreaking at 2 p.m. May 22. And continue to thank God for His guidance and protection in this process.
Dick
Richard Hart, MD, DrPH
President
Loma Linda University Health