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Navajo Well being Basis-Sage Memorial Hospital was already going through a budgetary shortfall when it tapped the muni bond market in 2024 with an $80 million nonrated deal to assist full a brand new state-of-the-art hospital.
“All of it goes again to the funds, that turning level of getting that bond,” stated Melinda White, CEO of Sage Memorial Hospital. “All of the work that went into acquiring that bond: It was very tiresome; there have been sleepless nights. Once you undergo an expertise like that, the place it’s simply so annoying, and also you come out of it … I like to think about it as: ‘We have gone via some robust occasions, and we’ve lots of resilience, and that is the place the power is coming from, so far as all the new companies and all the pieces that we’re doing.'”
The funding paid off, she stated, because the funding supported new amenities and housing, serving to tackle challenges that Navajo Nation communities and different Native Individuals face, equivalent to long-distance journey and restricted entry to well being care.
“It is extremely difficult to stay in a rural space and to obtain the healthcare wants, even preventive care. That is how vital Sage and the encircling hospitals are for communities,” White stated.
The Sequence 2024 deal, priced via the Arizona Industrial Improvement Authority, has been named the Well being Care Financing class winner in The Bond Purchaser’s 2025
The deal represents a significant landmark in furthering Native American healthcare infrastructure, as tribal governments face hurdles when issuing munis, together with tax code restrictions, restricted instruments and land possession points.
The deal additionally demonstrates a non-profit healthcare supplier’s skill to leverage nontraditional income sources — enabled by tribal contractor standing — to safe tax-exempt munis, in keeping with the nominating assertion.
The $80 million deal supplied a “vital recapitalization of Sage’s stability sheet, reimbursing it for beforehand spent building prices to construct the venture,” the assertion stated.
Sage — which serves eight Navajo communities with a inhabitants of roughly 23,000 in northeastern Arizona — in 2021 began setting up a brand new hospital, an worker housing facility, a neighborhood room, workplace area and a medical workplace facility, some 20 odd years after discussions first began, White stated.
The $177 million venture included greater than 190,000 sq. ft of amenities, making it one of many greatest rural healthcare capital tasks within the space in recent times, stated Carson Folks, conduit bond enterprise improvement officer for the Arizona IDA.
Initially, the venture was funded with money reserves and attracts on a line of credit score, however Sage knew it wanted to hunt various financing in some unspecified time in the future. With this in thoughts, the hospital started the method of issuing municipal bonds, however confronted challenges from the beginning.
The hospital is a tribal facility underneath Public Regulation 93-638, the Indian Self Dedication and Training Help Act, which permits Native American hospitals to function independently whereas nonetheless receiving federal funding via businesses such because the Indian Well being Service.
Initially, Sage labored with a distinct investor, who was challenged by waiving sovereign immunity, which the investor believed would enhance his/her rights, stated Leonard Jones, government director of municipal capital markets at Blaylock Van.
That was by no means going to occur, and from there, underwriter Blaylock Van and municipal advisor Kaufman Corridor got here on board within the fall of 2023 after Sage had labored on the deal for over two years, stated John Andersen, senior vp at Kaufman Corridor.
Blaylock Van and Kaufman Corridor approached the state of affairs from a standpoint that sovereignty didn’t must be waived for traders to really feel snug, Jones stated.
“That they had expertise, and so they had been prepared to take the problem of, ‘We will actually work this via.’ It was actually [a result of] their persistence and fixed communication,'” White stated.
The agency even introduced on authorized counsel and employed counsel for traders to make sure they had been snug with out a waiver of sovereign immunity, Jones stated.
The hospital’s location introduced one other difficulty. The hospital is surrounded by the Navajo Nation Reservation. Reservations, although, can’t be mortgaged since they’re owned by the federal authorities.
“It is not like a typical metropolis or county or space that may have its personal property taxes and mortgage land,” Jones stated. “So that is what makes it actually tough.”
On this case, although, the hospital was within the Navajo Nation however on land owned by the Presbyterian Church. Because of this, traders gained some consolation they’d not have had, Jones stated.
Moreover, a June 2024 Supreme Court docket ruling on reimbursements was a constructive. “We’re making an attempt to promote these bonds for this hospital in the midst of the reservation, the place a number of the reimbursements from Indian Well being Companies had been going to go up,” Jones stated.
Buyers had been additional reassured by Sage’s threat profile, which features a “distinctive safety construction using numerous mortgage pledges, a Deposit Account Management Settlement, cost lockbox, restricted sovereign immunity waivers, and plenty of different bespoke options,” Andersen stated.
Total, the deal took a number of years to finish and was very time-consuming. Each week, Sage, Blaylock, and Kaufman Corridor spent hours upon hours engaged on the bonds’ documentation and discussing them, White stated.
“The manager staff, the attorneys, and our traders and underwriters are all working collectively on, ‘OK, that is what is going on to occur.’ And there have been these fixed revisions or updates, and likewise feasibility research, as a result of we had been bringing in new companies,” she stated.
Sage additionally needed to undergo the Arizona IDA, which coached Sage and helped it put together the paperwork, White stated.
Sage initially utilized to the Arizona IDA in Could 2022 with a bigger venture scope, looking for preliminary approval on a $100 million-plus deal. The hospital later revised its utility in Could 2023 to not more than $80 million after the hospital did some “worth engineering and made it leaner [and] extra environment friendly,” Folks stated.
At that time, Sage obtained preliminary approval and, in Could 2024, returned to hunt last approval from the Arizona IDA, which was unanimously granted, he famous.
When Blaylock Van priced the deal on Nov. 19, 2024, for the Arizona IDA on behalf of Sage the $31 million chunk of seven.125% bonds due 2044 priced at 7.375%, whereas the $49 million piece of seven.625% bonds due 2054 priced at 7.875%.
“The transaction was privately positioned with a bunch of 4 institutional traders,” Andersen stated. “Market reception was constructive and a number of traders had been engaged all through advertising. In my view, traders acknowledged Sage’s significance, the need of the venture, and the financially sustainable strategy to the transaction’s design.”
“The bond got here at an ideal time,” White stated, and the hospital was accomplished in August 2024 and opened quickly after.
The hospital now supplies expanded companies, together with surgical procedure, dialysis, intensive care and labor and supply, a boon as beforehand sufferers and their households needed to journey lengthy distances, typically as much as 100 miles round-trip, to the subsequent closest facility, per the nominating assertion.
The brand new campus additionally contains an expanded outpatient clinic and inexpensive employees housing, key for a hospital working in a distant rural space, the nominating assertion stated.
Moreover, the cell unit offers medical care to sufferers unable to journey to the hospital, whether or not due to socioeconomic points or unpaved or muddy roads, White famous.
“I see it as so vital that we proceed to increase and we proceed to deliver extra companies to Sage,” she stated. “That is what our plans are for the subsequent 5 years.”
The previous three years had been a “full transition” that modified the tradition, White stated.
“Proper now, we’re constructing on the Sage Memorial Hospital expertise, and we’re actually incorporating our lifestyle with the Navajos, our western medication, and the normal, and placing them collectively … We’re on a journey of Diné excellence, and we’re going to have the ability to place each of them parallel,” she stated.
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