Health systems rush to sell bonds ahead of tax changes: 4 things to know

As Congress debates whether to eliminate tax exemptions on private-activity bonds beginning Jan. 1, borrowers, including health systems, are hurrying to issue tax-free bonds before borrowing costs rise.

Here are four things to know about recent hospital bond issuance.

1. Nonprofit hospitals and health systems issue tax-exempt bonds to finance capital projects. Under the House Republicans' tax plan, interest on newly issued private-activity bonds would no longer be tax-exempt. The move to eliminate tax exemptions for new private-activity bonds is not included in a bill passed by Senate Republicans on Dec. 2.

2. Some health systems are trying to mitigate the risk of being shut out of the tax-exempt markets. For example, Livonia Mich.-based Trinity Health moved up the sale of about $889 million of new and refunding bonds, which were originally to be sold in January 2018.

3. Mercy Health in Cincinnati also moved up a planned $585 million bond issuance, the proceeds of which will be used to refinance existing debt and invested in outpatient care. The bonds are expected to be priced next week instead of in the first quarter of 2018, Jerome Judd, Mercy's senior vice president of treasury and investment, told The Wall Street Journal.

4. Brad Spielman, a healthcare sector analyst at Moody's Investors Service, told The Wall Street Journal the debt rating agency will issue credit ratings for about $8 billion in nonprofit healthcare bonds this month. "This may very well be the biggest month of issuance since 2008," he said.

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