Half way through 2015, it's looking like not-for-profit hospital borrowing is bouncing back, reversing the trend of sluggish issuance that plagued the healthcare bond markets in the last several years.
According to Thomson Reuters, healthcare borrowers sold $18.9 billion in bonds through June 2015, a 76% increase over the $10.8 billion sold during the same period last year.
Healthcare registered the third highest year-to-year increase behind the electric power and education sectors.
Hospitals are driving most of the trend.
According to the HFA Partners database, $12.6 billion of this year's volume came from hospital deals, up 215% from $4.0 billion in 2014. HFA tracks hospital tax-exempt fixed rate revenue bond offerings but excludes general obligation (GO), bank placements and variable-rate issues.
Deal size went up significantly in 2015. The median hospital deal this year is $126 million vs. $71 million last year.
Credit quality stayed relatively consistent across the issuance spectrum, with "A" category or better issues making up 72% of 2015 hospital volumes vs. 66% in 2014.
The higher issuance volumes are due in large part to refundings as hospitals continue to take advantage of low rates in spite of the MMD being up 40 basis points since the beginning of the year.
Because refundings replace existing debt, they do not increase supply like new money deals do. This has helped keep hospital credit spreads low, which is good news for borrowers.