Dayton Children’s to sell $235M in bonds for new center, debt

“One of the benefits of being a tax exempt organization is we’re able to actually sell tax-exempt bonds on our credit and generally get pretty low-cost financing,” said Chris Bergman, Dayton Children’s chief financial officer. “It’s like buying your house — you don’t pay cash on your house because you are going to live in it a long time, and so you can have a 30-year mortgage on it.”

Dayton Children’s Hospital expects to sell about $235 million in hospital facilities revenue bonds this week, though it has authority to sell up to $290 million, Bergman said.

Bonds are inexpensive debt, he said, and this is a good way to repay its earlier debt obligation and finance its new building.

Dayton Children’s Hospital does not have its own authority to issue bonds, but Montgomery County is acting as a conduit, officials said.

The county has no financial exposure or obligation through the transaction, officials said, and bonds are one way nonprofit organizations finance major capital projects.

Dayton Children’s took on debt for the first time in 2014, when the county approved the sale of about $120 million in bonds to help fund construction of the nonprofit organization’s new patient tower.

Those bonds were not sold publicly — they were purchased directly by J.P. Morgan, Bergman said.

But this time, the hospital’s bonds will be sold publicly, and Moody’s rated its bonds as A1 while Fitch gave a AA- rating.

Bonds issued through the county have tax-exempt status, meaning earnings on the debt are not subject to income taxes.

About $100 million of the new bond sales will be put toward the new outpatient center, Bergman said, while about $150 million will be used to repay the existing bonds from 2014 to 2016.

“The magic is that we’ll sell $235 million of bonds for more than $235 million — we’ll get something like $280 million out of the issuance,” he said, adding some money will go toward repayment of other improvement projects.

The new, 152,000-square-foot outpatient center is under construction and is expected to open in 2023.