Capital Financing – Trends and Realities...2014/04/14 · 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

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


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


Bond Issuance Through Mid-March 2014

What Do These Numbers Have in Common?

$2.2 Billion

50

68%

4


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


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


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


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


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


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


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


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


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


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



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



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



§ Source: Beyond the Balance Sheet: Assessing the Impact of the New Lease Accounting Standards, CFO Magazine, January 2012

19



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



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


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


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


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


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


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


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


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


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

mailto:[email protected]




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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.

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Documents

Capital Financing – Trends and Realities...2014/04/14 · 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