capital financing – trends and realities...2014/04/14 · 2012 2013 2014 1q 2q 3q 4q 1q 2q 3q 4q...
TRANSCRIPT
Capital Financing – Trends and Realities
Confidential – For Discussion & General Information Purposes Only
Cheryl H. Cohen, FHFMA, MBAVice President, Wells Fargo Equipment Finance
Nick WarnerSenior Vice President, Wells Fargo Healthcare Finance Group
Brian CarterDirector, Wells Fargo Securities
Jeff AllshouseDirector of Origination, Wells Fargo Multi Family Capital
©2013 Wells Fargo Bank, N.A. All Rights Reserved.
Government & Institutional Banking
Current Financing Trends
§ Direct Purchase
§ Letters of Credit
§ Traditional Bank Credit Facilities
§ Convertible Loans
§ Equipment Financing
§ Floating Rate Notes
§ Fixed Rate Bond Issue
Popular Forms of Financing
2
Government & Institutional Banking
Current Financing Trends
§ Direct Purchase Long Dated Tenors
§ Pricing Formulas
§ %L§ %L + SIFMA§ %(L+SIFMA)
§ Floating Rate Note Remarketing
§ Windows Products
§ Increased Costs / Regulatory Environment
Discussion Points
3
Government & Institutional Banking
Bond Issuance Through Mid-March 2014
What Do These Numbers Have in Common?
$2.2 Billion
50
68%
4
Government & Institutional Banking
Bond Issuance Through Mid-March 2014
What Do These Numbers Have in Common?
$2.2 Billion – Hospital bond issuance through mid-March 2014
50 – Percent less than a year ago
68% of year-to-date issuance has been new money; this period lastyear, 75% was for refundings
Source: Hospital Bond Volume Update, George Huang, Senior Analyst, Municipal Securities Research, Wells Fargo Securities, March 26, 2014.
5
Wells Fargo Securities, LLC 66
Hospital Bond Use 1996- Q1 2014
Source: Thomson Reuters/SDC Platinum, Wells Fargo Securities, LLC
$30
$35
$40
$45
$50
$55
$60
$65
$70
$75
$80
$85
$90
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
$55,000
$60,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD2014
$M
MP
arp
erIs
sue
(Avg
)
$M
MB
on
dP
ar
Total Not-for-Profit Hospital Bond Issuance Use1996 - Q1 2014
Advanced/Forward Refunding Current Refunding New Issue Combination Avg Issue Par
6
Wells Fargo Securities, LLC 77
Hospital Bond Issuance Modes 1996- Q1 2014
Source: Thomson Reuters/SDC Platinum, Wells Fargo Securities, LLC
35%
40%
45%
50%
55%
60%
65%
70%
75%
80%
85%
90%
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
$55,000
$60,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD2014
%F
ixed
-Rat
eIs
suan
ce
$M
MB
on
dP
ar
Total Not-for-Profit Hospital Bond Issuance Modes1996 - Q1 2014
Fixed Auction Variable (Short Put) Variable (Long/No Put) Other Variable Linked Rate Convertible Zero Coupon % Fixed Rate
7
Government & Institutional Banking
Current Market Discussion
Key Interest Rates1,2
1LIBOR and SIFMA swap rates are for general information purposes only and were provided by a member of the Wells Fargo Bank, N.A. Municipal Derivatives Desk. Data source: WFBNA Derivatives Desk andBloomberg as of April 4, 2014. For any discussion regarding such rates, please contact the Derivatives Desk at 704-410-4083. 2Source: Thomson Reuters Municipal Market Monitor (“TM3”), April 4, 2014. 3Source:Lipper, A Thompson Reuters Company, April 2, 2014. 4Compound Annual Growth Rate (QoQ). 5Percentage Change (YoY). 6Source: Bloomberg, as of April 4, 2014 7SIFMA rate used to benchmark VRDN resets.8The Bond Buyer.
Wells Fargo U.S. Economic Forecast6
Market Update for the Week Ending April 4, 2014
§ Tax-exempt yields increased slightly over most of the yieldcurve, with the 10Y and 30Y “AAA” MMD increasing by 2 bpsand 1 bp, respectively, while the front end of the curve sawsmall decreases, with the 5Y “AAA” MMD decreasing by 1 bp.Treasury rates remained unchanged or increased, with 10Yyields unchanged and 30Y yields increasing by 4 bps,respectively.2
§ As of April 4, 10Y “AAA” MMD stands at 2.49%, 134 bps belowits 20-year average, while 30-year “AAA” MMD stands at3.64%, 115 bps below its 20-year average.2
§ Municipal bond funds reported net investor outflows of $81million for the week ending April 2. This represents the secondweek of net outflows since February 5th.3
§ The calendar for the week of April 7 is expected to includeapproximately $5.4 billion in long-term negotiated andcompetitive bond sales.8
Economist Outlook on the 30-Year US Treasury Rate6
Barclays
BAML RBC
Wells Fargo
MedianSurvey
3.75
4.00
4.25
4.50
4.75
2Q '14 3Q '14 4Q '14 1Q '15 2Q '15
(%)
2012 2013 2014
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Real GDP4 3.7 1.2 2.8 0.1 1.1 2.5 4.1 2.4 1.1 2.6 2.9 3.1
Unemployment Rate 8.2 8.2 8.0 7.8 7.7 7.5 7.2 7.0 6.6 6.5 6.4 6.3
Consumer Price Index5 2.8 1.9 1.7 1.9 1.7 1.4 1.5 1.2 1.4 1.8 1.7 1.9
Fed Funds Target Rate 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25
10-Year Note 2.23 1.67 1.65 1.78 1.87 2.52 2.64 3.04 2.80 3.10 3.15 3.33
30-Year Bond 3.35 2.76 2.82 2.95 3.10 3.52 3.69 3.96 3.70 4.00 4.05 4.23
Actual Forecast
4/4/2014 3/4/2014 4/4/2013 10 Yr Avg.
SIFMA 0.06% 0.03% 0.11% 1.39%
1M LIBOR 0.15% 0.16% 0.20% 1.89%
"AAA" MMD (30Y) 3.64% 3.68% 3.03% 4.19%
"AA" MMD (30Y) 3.88% 3.91% 3.28% 4.35%
“A" MMD (30Y) 4.37% 4.40% 3.75% 4.74%
UST (10Y) 2.72% 2.64% 1.76% 3.46%
UST (30Y) 3.58% 3.59% 2.99% 4.19%
SIFMA Swap Rate (10Y) 2.32% 2.41% 1.57% 2.95%
LIBOR Swap Rate (10Y) 2.83% 2.79% 1.93% 3.77%
SIFMA Swap Rate (30Y) 3.23% 3.48% 2.64% 3.60%
LIBOR Swap Rate (30Y) 3.56% 3.61% 2.89% 4.30%
8
Government & Institutional Banking
Municipal Market Snapshot
Source: Bond Buyer: “A Decade of Municipal Bond Finance,” as of April 4, 2014.*Represents long-term issuance; excludes short-term notes and remarketings
Annual Municipal Bond Volume* Municipal Bond Fund Flows
Source: Lipper, A Thomson Reuters Company, as of April 2, 2014. Represents only funds that reportweekly.
Short-Term Interest Rates Remain Compressed
Sources: TM3 and Bloomberg, as of April 4, 2014. Source: Bloomberg, as of April 4, 2014.
Tax-Exempt/Taxable Ratios
0
100
200
300
400
500
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
($Bill
ions
)
Annual Volume Annual Average
(5.0)
(4.0)
(3.0)
(2.0)
(1.0)
0.0
1.0
Mar-13 May-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14
($Bill
ions
)
Heightened volatility has led to netinvestor outflows of $43.3 billion
since March 2013
40
60
80
100
120
140
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14
(%)
(%)
MMD/UST 30Y MMD 30Y UST
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14
(%)
SIFMA 1M LIBOR
SIFMA currently stands at 0.06%,3 bps higher than its all time low,while 1-month LIBOR currentlystands at 0.15%, its all time low30Y MMD 30Y UST MMD/UST
Min 2.47% 2.45% 87.9%Max 4.85% 4.65% 132.5%10Y Avg 4.19% 4.19% 100.1%Current 3.64% 3.58% 101.7%
9
Government & Institutional Banking
Tax-Exempt Rates Have Been Volatile Recently
Historical “AAA” MMD Ranges vs. Today’s “AAA” MMD1 Historical “AAA” MMD Yield Curves1
“AAA” MMD rates remain higher than all-time lows in November 2012
1Source: TM3; MMD range from January 1, 1990 through April 4, 2014.
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1 5 10 15 20 25 30
(%)
Years
MMD Range since 1990
Current MMD (4/4/2014)
MMD 1 Year Ago
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1 5 10 15 20 25 30(%
)
Years
Current MMD (4/4/2014)MMD 1 Year AgoMMD 2 Years AgoMMD 5 Years Ago
10
Government & Institutional Banking
Source: Bloomberg; Data as of April 4, 2014.
30Y UST Low ReachedJuly 25, 2012
2.45%
30Y MMD High ReachedJanuary 14, 2011
5.08%
Long-Term Tax-Exempt & Taxable Fixed Rates (30-Year)
After reaching all-timelows in the second half
of 2012, tax-exemptand taxable long-term
interest rates haveexperienced significantincreases and volatility
since May 2013
--
30Y MMD is up95 bps from
January 16, 2013 (2.69%)(2013 low)
--
30Y UST is up76 bps from
May 2, 2013 (2.82%)(2013 low)
30Y UST High ReachedFebruary 8, 2011
4.77%
Tax-Exempt and Taxable Market Movements Since January 2011
30Y MMD Low ReachedNovember 28, 2012
2.47%
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
Jan '11 Jul '11 Jan '12 Jul '12 Jan '13 Jul '13 Jan '14
(%)
30Y MMD 30Y UST
11
Government & Institutional Banking
Financial Institutions
1Source: Bloomberg as of April 4, 2014. CDS spreads for 5-year tenor; 2Sources: Moody’s, Standard & Poor’s, Fitch as of April 4, 2014.
Bank Credit Ratings2
Wells Fargo’s Credit Default Swap Spreads Are The Lowest of All Major Financial Institutions1
Bank Market Capitalization1
Moody’s S&P Fitch
LT ST Outlook LT ST Outlook LT ST Outlook
Wells Fargo Bank Aa3 P-1 Stable AA- A-1+ Stable AA- F1+ Stable
JPMorgan Chase Bank Aa3 P-1 Stable A+ A-1 Stable A+ F1 Stable
Barclays Bank A2 P-1 Neg A A-1 Stable A F1 Stable
Goldman Sachs Grp Baa1 P-2 Stable A- A-2 Neg A F1 Stable
Citibank A2 P-1 Stable A A-1 Stable A F1 Stable
Morgan Stanley Bank A3 P-2 Stable A A-1 Neg A F1 Stable
Bank of America A2 P-1 Stable A A-1 Neg A F1 Neg
260
226
176
143
76 67 60
0
50
100
150
200
250
300
Wells Fargo& Co.
JPMorganChase &
Co.
Bank ofAmericaCorp.
CitigroupInc.
GoldmanSachsGroup
BarclaysPLC
MorganStanley
($B
illio
ns)
0
100
200
300
400
500
600
Spr
ead
(bps
)
Wells Fargo JPMorgan Citigroup Bank of America Barclays Goldman Sachs Morgan Stanley
12
Government & Institutional Banking
452
329
284
271
421381
288
219$200
$250
$300
$350
$400
$450
$500
Tax-Exempt Money Market Fund Assets
Tax-Exempt VRDB Market
2Q 2009 3Q 2010 4Q 20131Q 2012
0.3 2
9
12
1415
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
2008 2009 2010 2011 2012 2013
Index LinkedNotes
254 263 263
297
335
397
431
$100
$150
$200
$250
$300
$350
$400
$450
$500
2007 2008 2009 2010 2011 2012 2013
Bank Muni Holdings
Recent Trends in Supply and Demand of Variable Rate Products
Decline in VRDB Market.....
....Leads to Growth in Alternative Variable Rate Structures
Growth in Tax-Exempt Bank Portfolios from Direct Purchase Growth in Index Linked Notes (FRNs, Windows, R-Floats, VROs)
Tax-Exempt Money Fund Assets Exceed Outstanding VRDBs New Issuance of VRDBs and Bank Facilities Have Fallen Sharply
Bil
lio
ns
Bil
lio
ns
Bil
lio
ns
Bil
lio
ns
Sources: Investment Company Institute. http://www.ici.org/mmfs/resources/research.Securities Industry and Financial Markets Association. http://www.sifma.org/research. Source: The Bond Buyer. http://www.bondbuyer.com/marketstatistics
Taxable crossover buyersbridged supply/demand gap(SIFMA at 25-30 bps)
Source: Securities Industry and Financial Markets Association. http://www.sifma.org/research. Source: The Bond Buyer. http://www.bondbuyer.com/marketstatistics
13
116
3225
14 15 13
100
25
15 12 8 7$0
$20
$40
$60
$80
$100
$120
2008 2009 2010 2011 2012 2013
VRDB Issuance
LCs/SBPAs
Demand in excess of supply(all-time low for SIFMA at 4 bps)
13
Government & Institutional Banking
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
5.50%
6.00%
Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14
30Yr MMD 30Yr Treasury
Bond Market Reaction to Recent Headline Events and 2014 Outlook
May 22(Bernanke speaks)
§ Bernanke testifies beforeCongress that a “stepdown” in quantitativeeasing could come soon,sparking a market sell-off
October(Gov’t Shutdown)
§ Congressional“Brinksmanship”causes a two weekpartial federalgovernmentshutdown
January – April(Cautious Start)
§ 2013 starts cautiously asthe market prepares forthe end of quantitativeeasing and the potentialfor higher rates
§ Fed reinforcesintent to keepshort-term rateslow for foreseeablefuture
§ Tapering expectedto finish by end of2014
§ Next FOMC meetingis March 18-19
§ How will fixedincome and equityinvestors react in2014?
§ The Fed announcesthe long-awaited QEtapering (reducingmonthly purchasesfrom $85B to $75B)
December(QE Tapering)
30Yr MMD and Treasury Rate Movements (2013-2014)
June - August(Continued Sell-off)
§ Continued volatility intax-exempt rates dueto Detroit bankruptcyand Chicago/PuertoRico downgrades
Source: Thomson Reuters as of 3/11/2014
2014 Outlook
14
Government & Institutional Banking
Lease Accounting update
§Financial Accounting Standards Board (FASB)
§International Accounting Standards Board (IASB)
§Introduced first Exposure Draft August 17, 2010
§Revised Exposure Draft issued on May 6, 2013
§Comment period until September 23, 2013
15
Government & Institutional Banking
Lease Accounting Update
A lease is capital if any one of the following fourtests is met:*
1. The lease conveys ownership to the lessee at the end of thelease term;2. The lessee has an option to purchase the asset at a bargainprice at the end of the lease term;3. The term of the lease is 75 percent or more of the economiclife of the asset.4. The present value of the rents, using the lessee’s incrementalborrowing rate, is 90 percent or more of the fair market valueof the asset.
* Borrowers should speak with their accountants before making any decisions regarding leases.
16
Government & Institutional Banking
Lease Accounting Update
Why change the rules?§ Investors can get an accurate picture of the entity’s
financial health§ Easier for investors and others to make rational
investment, credit and other decisions§ Consistency across the world in financial reporting of
leases§ The rationale behind the proposed changes is to provide
“users of financial statements … a complete andunderstandable picture of an entity’s leasing activities.”
17
Government & Institutional Banking
Lease Accounting Update
How will the rules be changed?§Off-balance sheet transactions regarding
operating leases will be placed on balance sheet• Includes real estate
§Entitled ‘right-of-use’ (ROU) asset with acorresponding future lease payment – liability§Type A – mostly non-real estate§Type B – mostly real estate
18
Government & Institutional Banking
Lease Accounting Update
§ Source: Beyond the Balance Sheet: Assessing the Impact of the New Lease Accounting Standards, CFO Magazine, January 2012
19
Government & Institutional Banking
Lease Accounting Update
Impact§ Increased debt§ Changes to Net worth§ Profitability§ Rating agencies view on financial health§ EBITDA§ the greatest concerns are over the impact on financial
ratios such as:• debt-to-equity (D/E ratio) and• return on assets (ROA)
20
Government & Institutional Banking
Lease Accounting Update
Current state of affairs§Final pronouncement expected no earlier
than end of 2014§Effective date will be no earlier than 2017§Will give companies the time to comply
with new rules
21
Government & Institutional Banking
HUD Hospital Program Historical Overview
§ Since 1968, 411 mortgage insurance commitments issued totaling $17.6 billion
§ HUD averaged 10 commitments per year over the past 10 years
§ Average loan size = $70 million
§ Volume projected to increase due to permanent loan programs introduction (March 2013)
§ Current Portfolio:
§ 84 hospitals
§ 109 active loans
§ $8.6 billion in unpaid principal balance
§ Facilities located in 31 states and Puerto Rico
22
Source: Department of Housing and Urban Development, Office of Hospital Facilities, March 31, 2013.
22
Government & Institutional Banking 23
HUD 242 Portfolio Geography
HUD 242 HospitalSource: HUD
23
Government & Institutional Banking
Components to an FHA 242 Financing: Mortgage Loan & Funding Source
§ The FHA approved Lender works with the applicant to secure a commitment to provide mortgageinsurance by HUD
§ Typically a 9-14 month timeline from decision to initiate process to funding of loan forconstruction loan (can be shorter for permanent loans)
§ There are a number of factors that will influence the length of process such as size ofapplication, complexity of credit and responsiveness of deal team to program requirements
§ With the commitment in place, Lender will use the enhancement by HUD to secure either tax-exemptbonds or taxable Ginnie Mae securities in order to fund the mortgage loan
§ Cost of funding (rate on either the tax-exempt bonds or taxable Ginnie Mae Securities) will helpdetermine the mortgage rate paid by the client
§ A deep distribution network, both in tax-exempt bonds and taxable securities, can help drivedown the ultimate mortgage rate achieved for the borrower
Source: Wells Fargo Multifamily Capital
Bond or GNMAInvestor
Mechanics of an FHA Transaction
Borrower Mortgage/Investment Banker
Mortgage Loan(Funds the Project Need)
Mortgage Payments(Backed by GNMA Guarantee)
Bond Proceeds /GNMA Securities
(Funds the Mortgage Loan)
“AAA/AA+” Credit(Backed by HUD Mortgage
Insurance)
2424
Government & Institutional Banking
HUD 242 Eligibility Requirements
§ Minimum Acute Care Patient Days: Greater than 50%.§ On-campus LTAC, SNF, ALF, and psychiatric hospital services are not considered acute care.
§ Maximum LTV: 90%.
§ Minimum DSC:§ New Construction /Rehab: 1.25x (historical three-year average)§ Permanent (Acquisition or Refinance): 1.40x (historical three-year average)
§ Minimum Operating Margin: Positive three-year aggregate historical operating margin.§ Turnaround stories considered (2 years demonstrated turnaround history and 1 year pro forma).
§ Licensure: Hospital licensed by the State or other political subdivision of the State.
§ Regulatory Compliance: Hospital in substantial compliance with fed/state regulations governing hospitaloperation and reimbursement.
§ First Mortgage Lien:§ Borrower must have ability to grant first lien on present/future assets and accounts receivable.§ Requires refinancing of existing secured mortgage(s).§ HUD must approve any subsequent subordinate liens.
25
Government & Institutional Banking
HUD 242 HOSPITAL PROGRAM SUMMARIES
26
Characteristic 242 241 223(a)(7) Loan Mod 223(f)Summary For hospitals not yet
in FHA portfolio:New Construction,sub-rehabwith/without existingdebt refinanced.Minimum 20% ofFHA insured loanused for Rehab; up to80% for refinance.
For hospitalsalready in FHAportfolio: NewConstruction,sub-rehabwith/withoutexisting debtrefinanced.
Refinance ofmortgages alreadyin FHA portfolio.Allows termextensions as wellas additional capitalimprovements (upto 20%; > 20% use241 program)
Interest ratereduction toolfor mortgagesalready in FHAportfolio. Allother loan termsremainunchanged.
Refinance ofhospitals not yetin FHAportfolio: Up to20% used forcapitalimprovements
LTV/LTC Max 90% 90% N/A N/A 90%
Term Max 25 years 25 years< of 25 years, orremaining Term +12 years
Existing Term 25 years
Interest Rate Fixed Fixed Fixed Fixed FixedDSC Min 1.25 for NC/SR 1.25 1.11 NA 1.40
Application/Commitment Fee
30 bps 30 bps 30 bps N/A 30 bps
Inspection Fee 50 bps 50 bpsVaries (up to 40bps)
N/AVaries (up to 40bps)
Annual MIP 70 bps 65 bps 55 bps Existing MIP 65 bps
New Covenants? Yes Yes Yes No Yes
Prepayment 10-yr lockout, par 10-yr lockout, par 10-yr lockout, parExisting LoanTerms
10-yr lockout,par
Guaranty Non-recourse Non-recourse Non-recourse Non-recourse Non-recourse
Government & Institutional Banking
HUD Issues FirmApplication Invitation
(HUD)
242 New Construction/Rehab Transaction Timeline
ProcessStages
ProcessingGuidelines
11 – 14Months
Pre- ApplicationPackage Preparation
(Lender)
Pre-ApplicationPackage Eligibility /
Completeness Review(HUD)
Pre-Application (2-3 months)
• Transaction overview,preliminary underwriting, andhospital business plansupport/presentation
• 3 years historical financials andpost-financing projections
• Hospital organization/management
• Market and competitiveoverview
Firm Application (7-8 months)
• Lender Firm Applicationunderwriting• Appraisal, market/feasibility
study, environmental,A&E/Cost, and Hospitaldeliverables
• Address Firm Applicationinvitationissues/requirements
Closing (2-3 months)
• HUD issues Firm Commitmentsubject to covenants• Special Conditions; Collateral;
Initial /Final EndorsementClosing Conditions;Regulatory Agreement
• Rate lock• Closing due diligence & loan
funding
HUD Pre-ApplicationMeeting at HUD HQ(Lender/Hospital)
Firm ApplicationPackage Submission(Lender/Hospital)
Loan Closing(Lender / Hospital)
15-30 Days ~ 14 Days 14-21 Days ~ 90-120 Days ~ 120 Days 60-90 Days~ 14 Days
HUD Firm ApplicationApproval and
Commitment Issuance(HUD)
27
Government & Institutional Banking
HUD 242 Key Advantages and Disadvantages
Advantages§ Up to 90% LTV (construction and/or permanent) at “AA” rates.§ More lenient approval criteria provides greater debt capacity than investment grade public finance
options.§ Consistent source of capital, independent of market conditions (Federal Government vs private
credit enhancement).§ Supplemental building and equipment funding via HUD 241 program.§ Waiver or modification of covenants negotiated with single party- HUD (vs multiple-constituent
bond approvals).§ Non-recourse (construction and/or permanent).
Disadvantages§ Approval process/timing longer than rated/unrated bond process.§ Limited “early construction” start (construction may only commence with HUD approval AFTER
application received by HUD).§ Davis Bacon prevailing wages may potentially add cost in locations dominated by construction
unions.§ No floating rate availability (less of an issue in current rate environment).
28
Government & Institutional Banking
Case Study: St. Barnabas Hospital - 223(a)(7)
Transaction Overview and Highlights
§ Plan of Finance§ Refinance a $66,000,000 Section 242 mortgage loan
§ The 223(a)(7) program allows hospitals to finance the construction ofcertain improvements, upgrades and additions to their property andfacilities, as determined by HUD
§ In addition to the refinancing, the Hospital received approval from HUD toincrease their loan by $20,000,000 of new money to help finance theconstruction of a new boiler plant
§ Deal Highlights§ The St. Barnabas Hospital GNMA financing resulted in the first HUD
223(a)(7) financing for a hospital that included a new money componentwhich allowed SBH to refinancing existing-FHA bonds, producingsignificant debt service savings
§ A key initiative of SBH’s administration was to replace its boiler plant thatwas twenty years past its useful life
§ The refinancing and boiler plant project were not only essential to theHospital’s financial position but also critical to the Hospital’s ability tooperate in a safe, reliable environment and within New York City coderequirements
§ Wells Fargo, with HUD’s leadership, successfully developed and executeda strategic refinancing plan that produced more than $8.8 million insavings to the Hospital
§ Financing Summary§ GNMA Security Rate: 4.21% priced over the 9-year LIBOR swap curve
§ Average Life: 9 years (17-year final maturity)
§ Annual Operational Savings: $3.5 million
§ Refunding NPV Savings: $5.3 million
29
$86,358,900U.S. Department of Housing and Urban Development
Section 223(a)(7) FinancingGovernment National Mortgage Association
(“GNMA”) Mortgage Loan
Pricing Date: August 23, 2013
Use of Proceeds: Refinancing / New Money
Interest Rate: 4.21%
Ratings: Aaa/AA+/AAA
29
Government & Institutional Banking
The Wells Fargo Advantage
Questions ??
Contact Information:
Cheryl Cohen 609.259.3363 [email protected] Warner 215.670.7020 [email protected] Carter 215.670.6039 [email protected] Allshouse 770.650.4449 [email protected]
30
Wells Fargo Securities, LLC
Additional information is available on request.
This report was prepared by Wells Fargo Securities, LLC.
About Wells Fargo Securities, LLCWells Fargo Securities, LLC is a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a memberof the New York Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corp. WellsFargo Bank, N.A. and Wells Fargo Securities, LLC are each registered with the U.S. Securities and Exchange Commission and theMunicipal Securities Rulemaking Board as municipal securities dealers.
Important Information for Non-U.S. Recipients
EEAThe securities and related financial instruments described herein may not be eligible for sale in all jurisdictions or to certaincategories of investors. For certain non-U.S. institutional reader (including readers in the EEA), this report is distributed by WellsFargo Securities International Limited (“WFSIL”). For the purposes of Section 21 of the UK Financial Services and Markets Act2000 (“the Act”), the content of this report has been approved by WFSIL a regulated person under the Act. WFSIL does not dealwith retail clients as defined in the Markets in Financial Instruments Directive 2007. This research is not intended for, andshould not be relied upon, by retail clients. The FCA rules made under the Financial Services andMarkets Act 2000 for the protection of retail clients will therefore not apply, nor will the Financial Services CompensationScheme be available.
AustraliaWells Fargo Securities, LLC is exempt from the requirements to hold an Australian financial services license in respect of thefinancial services it provides to wholesale clients in Australia. Wells Fargo Securities, LLC is regulated under U.S. laws whichdiffer from Australian laws. Any offer or documentation provided to Australian recipients by Wells Fargo Securities, LLC in thecourse of providing the financial services will be prepared in accordance with the laws of the United States and not Australianlaws.
Hong KongThis report is issued and distributed in Hong Kong by Wells Fargo Securities Asia Limited (“WFSAL”), a Hong Kong incorporatedinvestment firm licensed and regulated by the Securities and Futures Commission to carry on types 1, 4, 6 and 9 regulatedactivities (as defined in the Securities and Futures Ordinance, “the SFO”). This report is not intended for, and should not berelied on by, any person other than professional investors (as defined in the SFO). Any securities and related financialinstruments described herein are not intended for sale, nor will be sold, to any person other than professional investors (asdefined in the SFO).
JapanThis report is distributed in Japan by Wells Fargo Securities (Japan) Co., Ltd, a Japanese financial instruments firm registeredwith the Kanto Local Finance Bureau, a subordinate regulatory body of the Ministry of Finance in Japan, to conduct broking anddealing of type 1 and type 2 financial instruments and agency or intermediary service for entry into investment advisory ordiscretionary investment contracts. This report is intended for distribution only to professional customers (Tokutei Toushika)and is not intended for, and should not be relied upon by, ordinary customers (Ippan Toushika).
31
Government & Institutional Banking
This communication is for informational purposes only, is not an offer, solicitation, recommendation orcommitment for any transaction or to buy or sell any security or other financial product; and is notintended as investment. The information contained herein is (i) derived from sources that Wells FargoSecurities ("WFS") in good faith considers reliable, however WFS does not guarantee the accuracy,reliability or completeness of this information and makes no warranty, express or implied, with respectthereto; and is (ii) subject to change without notice. WFS accepts no liability for its use or to updateor keep it current. Products shown are subject to change and availability. WFS and/or one or more ofits affiliates may provide advice or may from time to time have proprietary positions in, or trade asprincipal in, securities that may be mentioned herein or other securities issued by issuers reflectedherein; or in derivatives related thereto. Commercial banking products and services are provided byWells Fargo Bank, N.A. Investment banking and capital markets products and services are providedby Wells Fargo Securities, and are not a condition to any banking product or service. Wells FargoSecurities is the trade name for certain securities-related capital markets and investment bankingservices of Wells Fargo & Company and its subsidiaries, including Wells Fargo Securities, LLC, memberNYSE, FINRA, NFA, and SIPC, and Wells Fargo Bank, N.A. (“WFBNA”). Municipal Derivatives solutionsare provided by WFBNA, a swap dealer registered with the CFTC and member of the NFA. Thiscommunication is not intended to provide, and must not be relied on for, accounting, legal, regulatory,tax, business, financial or related advice or investment recommendations and does not constituteadvice within the meaning of Section 15B of the Securities Exchange Act of 1934. You must consultwith your own advisors as to the legal, regulatory, tax, business, financial, investment, and otheraspects of this communication. Neither WFS nor any person providing this communication is acting asa municipal advisor or fiduciary with respect to any transaction described or contemplated thereinunless expressly agreed to in a written financial advisory or similar agreement.
32