BB&T Capital Markets Closes $137,885,000 Financing for Baptist Homes Society

Transaction Summary

On June 24, 2015, BB&T Capital Markets closed a $137,885,000 Series 2015 Fixed Rate Bond issue for Baptist Homes Society (BHS). The proceeds of the 2015 Bonds were used to refund the outstanding Series 2007 Variable Rate Demand Bonds (VRDBs).



Testimonials

BB&T Capital Markets was selected as our partner to assist Baptist Homes Society in refinancing our long term debt.  The choice of BB&T Capital Markets as our investment banker was providential.  We were very impressed not only by their knowledge of the market, but also by their considerable knowledge of the CCRC industry.  Their professionalism, their track record of success, and their confidence in their ability to close our deal were very encouraging and reassuring.  The team lead us through the process every step of the way, and their guidance was invaluable.  We could not have selected a better partner for our refinancing.



Alvin W. Allison, Jr. President & CEO, Baptist Homes Society

About the Companies

Baptist Homes Society dates back to 1910, and has operated a home to serve the needs of area seniors and their families since that time. Their Mt. Lebanon Campus includes 100 HUD subsidized apartments, 126 SNF beds, and 54 Assisted Living Units. It is primarily a fee-for-service community.



Financing Structure

In 2004, Baptist Homes Society undertook the development of a second CCRC campus in Pittsburgh known as Providence Point, consisting of 257 ILUs, 84 ALUs and 63 SNF beds. The Project was financed in 2007 with approximately $233 million of VRDBs backed by a line of credit (LOC) from Bank of Scotland (The Bank). Two other banks participated in the deal. Due to the repercussions from the financial crisis, the project struggled to achieve full occupancy and missed several bank covenants, resulting in The Bank taking corrective measures. As a result, the original investment banker attempted to restructure in the summer of 2013 with a traditional fixed rate, tax-exempt bond issue, but failed to get the deal sold after mailing a preliminary official statement. Therefore, The Bank was forced to extend the LOC to August 15, 2015.

Due to increasing tension between the borrower and The Bank, BB&T Capital Markets was hired in March by the borrower’s consultants to assist with executing a senior/subordinate structure with senior bank debt and subordinated tax-exempt bonds similar to the Laurel Lake transaction that BB&T completed in 2013. However, given the financial metrics and the desire of BHS to possibly pursue an ILU expansion in the near future, BB&T recommended an all traditional fixed rate bond financing in the amount of approximately $135 million. The recommended plan of finance created an annual debt service requirement that was similar to the senior/subordinate structure and also provided the borrower with a much more stable and flexible capital structure. Although the Bank of Scotland represented to the Board that they wanted out of the credit, they did not support BB&T’s recommendation because the bank was skeptical that such a transaction was achievable given the failed attempt by the original investment banker less than two years earlier.

BB&T approved the credit for retail distribution and brought the deal to market on June 3rd, 2015. Despite interest rates having climbed more than 40 basis points during the preceding five weeks, and despite a very volatile market on the day of pricing, with interest rates increasing another 10 basis points during the week of pricing, BB&T completed a successful sale of the bonds at an average yield of 6.05%. Within one hour, BB&T had sold $70 million of the deal. However, because the deal was so large and the market was so volatile, BB&T repriced the final maturity to yield 6.25% and was prepared to underwrite $27 million in bonds at that point. The willingness to underwrite was important because it enabled BB&T to secure orders for the balance and get the entire deal sold. The interest rates that BB&T obtained on behalf of BHS compare very favorably to a similar credit in Ohio that was a much smaller deal. Therefore, BB&T not only got the deal done, but at attractive interest rates compared to a similar, but smaller transaction.



Healthcare

BB&T Capital Markets has a highly experienced team dedicated to the healthcare industry. Our senior living group has an annual financing volume that typically exceeds $1 billion in bond issues, loans and direct placements. Our Mergers & Acquisition Advisory team has executed more than 35 transactions generating in excess of $3 billion of aggregate consideration for clients over the course of their careers.

About BB&T Capital Markets

BB&T Capital Markets offers an integrated platform of equity and debt underwriting, M&A advisory, corporate banking, and sales and trading. Headquartered in Richmond, VA, with offices throughout the US, we have specific expertise within 10 distinct industry verticals including Automotive Aftermarket; Commercial & Industrial; Education; Energy; Financial Services; Food & Agribusiness; Healthcare; Logistics & Transportation Services; Real Estate; and Retail & Consumer. Our commitment to industry expertise, combined with our resources as one of the nation's strongest financial institutions, strategically positions BB&T Capital Markets to build lasting relationships and contribute measurably to the long-term success of our clients.

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