Bonds

The Boston Medical Center sold $232 million of revenue bonds at the end of February to finance green modifications to several of its facilities in pursuit of a net-zero carbon initiative.

The new credit carried a sustainability designation from Kestrel Verifiers as it contained elements of both green and social bonds. The issuance was the first time such bonds were sold on behalf of a non-profit healthcare organization, BMC said in a press release.

Initial orders for the bonds were nine times oversubscribed, allowing the hospital to take advantage of lower interest rates to save $5.4 million in debt service over the life of the bonds, BMC said. Biannual debt service payments are to be made from the healthcare operator’s revenue.

The Series G, 2023 revenue bonds pay interest rates of 5.25%, 5.25%, and 4.37% on 2048, 2052, and 2052 term maturities, respectively. RBC Capital was the lead manager on the issuance that came through the Massachusetts Development Finance Agency.

BMC, a non-profit 514-bed academic medical center and hospital in Boston’s South End that’s part of the Boston Medical Center Health System, is pushing for net-zero carbon emission at all of its facilities by 2030.

“Sustainability bonds are both green bonds, recognizing BMC’s leading efforts on environmental issues, and social bonds, which reflect BMC’s role as an essential safety-net provider and national leader on health equity and social determinant of health supports in wraparound care for patients,” the release said.

BMC said it will use the funds to carry out green modifications to several of its facilites while adding 60 medical-surgical beds,10 ICU beds, five new operating rooms, and new pre-and post-op areas.

S&P Global rated the new debt BBB with a positive outlook while maintaining a BBB rating on BMC’s $570 million of existing debt. Moody’s Investors Service gave the bonds a Baa2 rating with stable outlook while maintaining a Baa2 rating for existing debt.

Moody’s cited in their decision questions about BMC’s long-term financial stability and its “ability to generate margins supporting adequate debt service coverage while providing sufficient funding for capital and other investments in patient care, both of which depend on the hospital “own expense management and growth initiatives, and on government policy decisions outside its control.”

“Positively for BMC’s credit profile,” the report continued, “Massachusetts has regularly recognized and supported BMC’s unique role, including through extraordinary grants to manage COVID-related disruptions,” adding that the stable outlook reflects expectations that BMC “will continue to generate relatively stable, albeit modest consolidated margins.”

Last year, BMC opened the Brockton Behavioral Health Center after carrying out $41 million in similar green upgrades to turn a former nursing home into an 82 bed, inpatient psychiatric care and substance use treatment facility that is run entirely off renewables.

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