Riding the wave of health care deals that have been hitting the market, a top-notch nursing home credit will sell $4.7 million of refunding bonds this week in a deal that analysts say will be welcome in its home state.
The New Haven-based Mary Wade Home Inc. will issue the negotiated bonds through the Connecticut Development Authority. Herbert J. Sims & Co. will underwrite the deal, which includes a $165,000 taxable portion. Fitch IBCA Inc. rates the deal A-minus.
'As far as the credit itself ... this is definitely the strongest nursing home in our portfolio. It's our only A-minus,' said Fitch analyst Richard S. Szalkowski.
Frank Gagliardo, senior vice president for the CDA, said the A-minus rating is what makes this deal so attractive.
'The Fitch rating for a home like this is unheard of that and the fact that they're flush with cash ... I would be absolutely stunned if this doesn't go extremely well,' he said.
Robert C. Wetzler, also a Fitch analyst, said the reason Mary Wade has such a strong rating is because of its conservative financial planning. Although almost 70% of the home's revenue comes from Medicaid, it has a very low exposure to Medicare, Wetzler explained.
'They're reimbursed pretty favorably under the Medicaid system,' he said. 'They get close to $160 per patient a day for skilled nursing.'
Szalkowski noted there is a growing number of private-pay patients who pay out of their own pockets.
'They can charge rates that are more profitable on private pay,' Wetzler said. 'This really makes them stand out. I think everyone in the nursing home industry is going for a higher number of private-pay patients.'
Mary Wade is one of the nursing homes in the industry that, while receiving direct federal reimbursement through Medicare, does not participate in insurance programs that are combined with Medicare. And some patients are willing to waive their Medicare/health maintenance organization plans to take on the cost of the home themselves, said Susan Redman, chief financial officer at Mary Wade.
For a semi-private room, there is a $220 per day fee, and for a private room that fee is $260. The growing number of private-pay patients is positive for the home because it can put the money it earns directly into providing services because it is a not-for-profit organization, Redman explained.
In general, Gagliardo said he feels the local market will 'swallow up' the deal.
'Connecticut is a reasonably affluent state, and it's very difficult to get tax-exempts,' he said. 'It's an excellent issue, and it's small. I think this will go in a heartbeat.'
The majority of the bonds will be used to refinance Series 1988 bonds. The rest will fund renovation projects.
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