Diakon completes bond sale, savings to fund capital investments
Middletown, Pa. (Thursday June 4, 2015)
Diakon has successfully priced a bond sale to refinance existing debt and generate significant annual cash flow that can be used to meet capital reinvestment needs.
According to Scott Habecker, CPA, Diakon’s chief financial and chief operating officer, $147.5 million of Cumberland County Municipal Authority Revenue Bonds, Series 2015, were priced in early May, with closing occurring today.
“No new debt was issued in this transaction,” says Habecker, who indicates the proceeds from the Series 2015 Bonds, priced at approximately 4% interest, will be used to advance-refund all of Diakon’s 2007 bonds at 5% interest and most of 2009 bonds at approximately 6% interest. Investor interest in the deal was strong, he adds, with total orders of more than three times the issuance. Following the closing, 70% of Diakon’s bond debt will be fixed rate.
In preparation for the bond issue, Fitch Ratings of New York had affirmed Diakon’s credit rating of BBB+, outlook stable, based on the organization’s conservative debt profile, its regional diversity and size, and significant improvements over the last 24 months in both senior living occupancy and financial performance.
“Of key importance to us is the fact the bond issue will reduce Diakon’s annual debt service payments from $17.6 million to $16.6 million over each of the next 23 years,” Habecker says, based on favorable market conditions and the structure of the deal.
“While the bond issue generates important savings, further adding to Diakon’s financial stability, it is also critical that people understand that the funds we save are critical to our continued efforts to keep our senior living communities market-leaders,” he says. “That effort requires very significant financial investments. In 2014 alone, we spent $17.7 million on capital projects, improvements, and property maintenance.”
Fitch recognized this effort in its report, noting that Diakon’s capital spending, funded by both bond and operational funds, “has supported projects that have improved the marketability of various campuses, as well as funded a system-wide electronic medical records” project.
The bond sale was led by Wells Fargo, lead underwriter, with PNC Bank and M&T Bank serving as co-managers.
For further information, please contact:
William Swanger, M.A., APR
Senior Vice President, Corporate Communications
Diakon Lutheran Social Ministries