Fewer municipal bonds draw investors to riskier hospital deals

A decrease in municipal bond issuance activity may benefit some hospitals, according to Reuters.

Because cities, states and other governmental entities are issuing fewer municipal bonds, credit that investors once viewed as risky, such as "BBB"-rated hospitals, are seeing higher demand in the market, Alan Schankel, municipal strategist at Janney Montgomery Scott, told Reuters.

The demand will likely increase this summer when municipal bonds worth billions of dollars exit the market. "With so much money and cash pouring back into the market, you have guys flush with cash with nowhere to put it," Greg Saulnier, municipal research analyst at Thomson Reuters' MMD, told Reuters.

However, interest from investors could be short lived as uncertainties in the healthcare environment may make investors shy away from debt tied to healthcare, particularly city and safety-net hospitals, according to the report.

"We have seen incremental rating pressure recently, even among some of our largest and strongest organizations," Martin Arrick, managing director of S&P Global Ratings, told Reuters. "This pressure could grow, and threaten our stable outlook on the sector, depending on administrative and legislative actions under the new administration."

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