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PFM’s professional teams include experts in every major area of public finance.
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PFM is the industry leader in virtually all segments of the municipal finance industry.
Public Financial Management professionals assisted a health care client to identifying external risk in its debt portfolio and developed a strategy to reduce the level of risk without materially increasing the client’s cost of capital.
A health care client was concerned that its debt portfolio embodied excessive risk that was unrelated to the client’s own credit. The client was particularly concerned that the banking industry as a whole was subject to credit volatility, and that certain sectors of the tax-exempt money markets could experience significant volatility if a major bank experienced a credit event.
PFM was retained to assist the client to quantify the level of such external risk and recommend a strategy which would reduce the level. The client wanted to mitigate the risks identified, but not in a manner which would materially increase its cost of capital.
We analyzed the components outstanding debt portfolio and factored in future capital financing needs.
We recommended the following restructurings of certain outstanding issues which required bank facilities:
The recommendations were accepted by the client and implementation was commenced.
Requests for Proposals for a Direct Placement were issued, and after review of the proposals, a bank was selected to provide a five year facility keyed to 30 day LIBOR so as to eliminate basis risk;
An investment banking team was selected to underwrite an issue of Floating Rate Notes with a final put period of five years, and which floated with 30 day LIBOR. The issue was successfully marketed to money market investors other than the traditional money market funds, thereby diversifying the client’s investor base while also eliminating bank risk.
Upon completion of execution of the strategy, the client will have reduced its exposure to the banking industry from 52% of its debt to 32%, while retaining an average risk adjusted cost of capital of less than 5% for the 30 year average life of its debt portfolio.
These materials are based on factual information from actual projects that The PFM Group of companies has engaged in for a client. They are for general information purposes only and are not intended to provide specific advice or a specific recommendation. The results of individual projects will vary significantly depending upon the size and structure of each transaction, permitted investments, prevailing market conditions at the time of the transaction, and other events or circumstances beyond our control. Past performance does not necessarily reflect and is not a guaranty of future results. The information contained in these case studies is not an offer to purchase or sell any securities.