HHC board authorizes bond refunding plan to convert 2010-era debt, free reserves and reduce future payments

The Health and Hospital Corporation Board of Trustees approved resolutions to proceed with refunding portions of its outstanding 2010 A2 and 2010 B2 bond series, a multi-step transaction presented by the bond bank and HHC finance staff that aims to convert portions of taxable Build America Bonds-era debt to tax-exempt financing and reduce future rental and debt service payments.

Karen Strunk, deputy director of the bond bank, told the board the requested authorizations would allow reissuance of the 2010 A2 and B2 series and an addendum to the lease with the Indianapolis Marion County Building Authority. She said the structure would (1) convert some bonds to tax-exempt financing, (2) replace a cash-funded debt service reserve with a surety that would free approximately $33.8 million in cash, and (3) add a 10-year par call to improve optionality. The presentation cited roughly $140 million outstanding on the 2010 A series and about $328 million outstanding on the 2010 B series.

The financing plan presented the following illustrative figures: up to $150 million par for the HHC general obligation (tax-exempt) series with an estimated annual cash-flow savings of about $720,000 (roughly $10 million over the life of that issuance), and an issuance for the lease-backed series with a maximum par of $345 million and estimated annual gross savings of approximately $1.6 million (about $23 million over the life). The presenters said these figures are estimates and depend on market conditions and final structure at sale.

James Simpson, interim CFO and assistant treasurer, and external advisors described a timeline of approvals: introduction/filing before the City-County Council (July 7), Building Authority consideration (July 9), Municipal Corporation Committee review (July 9), City-County Council final approval (August), and bond bank approval before an expected market sale in September. Board members did not vote against the resolutions; both resolutions passed by unanimous roll call.

What happens next: HHC and its advisors will seek the listed municipal approvals, finalize financing documents and pricing in the market, and return to the board with final terms and execution steps. The transaction, if completed as presented, would reduce near-term cash obligations and lower subsidy-exposure associated with the earlier federal Build America Bonds program.

Speakers relevant to this item are recorded as Karen Strunk (deputy director, bond bank), James Simpson (interim CFO and assistant treasurer) and Robert W. Lazard (chairperson).