Disclosure Advisory   Print E-mail


Once a decision has been made by a health care organization to proceed with a public offering of bonds, the financing team will assemble to assign specific tasks. One highly critical task is the preparation of the disclosure section of the Official Statement, usually referred to as Appendix A. All too often, someone will instruct the borrower’s CFO to "whip up something that looks like this," referring to an Appendix A from that organization's last bond issue or one from another organization's more recent bond issue. The CFO, whose staff is already overburdened with routine responsibilities, does not have ready sources of assistance with this often daunting task.

What to do?


First River Advisory has a solution — engage First River Advisory as a Disclosure Consultant for the sole purpose of drafting the Appendix A. First River Advisory has been drafting health care organizations' Appendix A's since its founding. All of these organizations were, at the time, weaker credits, so the quality and completeness of the Appendix A was crucial to ensure the marketability of the bonds. The description below provides a generalized picture of our approach when serving as Disclosure Consultant — the specific actions we take for each client may vary.


The principal source of input to Appendix A's drafted by First River Advisory is existing reports and other "off-the-shelf" information provided by the borrower. First River Advisory sometimes requests a special query of the borrower's information system, but very rarely the production of any text. Other sources of data include other professionals on the financing team, and governmental and other public websites which First River Advisory believes to be reliable. First River Advisory then applies its knowledge of hospital operations and the health care system by adding narrative and commentary to support the data. First River Advisory's meticulous transformation of raw data into the Appendix A relieves the borrower’s staff from the laborious drafting function.

First River Advisory routinely uses bar, pie and line charts and other graphics to illustrate data in relative and temporal contexts. First River Advisory is a licensee of Maptitude, a sophisticated geographical information system that can produce customized maps.


The outcome of the process is a clear, organized and well-presented Appendix A. These user-friendly characteristics are designed to appeal to the target audience - bond analysts.

Because bond analysts seem to have never met a bit of information they didn't like, they appreciate the comprehensive nature of Appendix A's drafted by First River Advisory. The Appendix A from the Official Statement relating to Series 2016 Bonds issued on behalf of Oaklawn Hospital ($138 million of annual net revenue in its FY2017) spanned 92 pages.

First River Advisory advises its clients that the Appendix A should try to contain "answers to every question ever asked" by bond analysts. In this way, interactions between hospital representatives and analysts, be they via conference calls, webcast road shows or site visits, can focus on adding "color" to the data and on analysts' more probing questions that typically begin with "what do you think about..." or "what do you plan to do about..." No time is wasted during these interactions chasing down raw data. Also, the borrower is better able to satisfy uniform-disclosure standards because the material factual data is contained in the Appendix A and not supplied separately. The Appendix A can encompass management's financial projections, with appropriate additional disclosures, when warranted.


The comprehensiveness of Appendix A's drafted by First River Advisory became particularly meaningful for Oaklawn Hospital in connection with its Series 2016 Bonds. Like many hospitals, Oaklawn rushed its bond issue to market prior to the 2016 presidential election. The market became flooded, and bond analysts were overwhelmed by the number of hospital bond issues being offered. One major institutional investor, which had never considered investing in any of First River Advisory's clients' bonds without first having a dialogue with hospital management, placed a significant order nonetheless, relying exclusively on the information included in Appendix A.

The comprehensive nature of a First River Advisory Appendix A typically helps to avoid the need for more than a limited number of "tweaks" following due diligence proceedings, so that major re-writes have been rare. To facilitate finalization of the Appendix A, First River Advisory can attend due diligence proceedings to record changes.

Drafts of Appendix A can be applied to rating agency and bond insurer processes. A comprehensive Appendix A is also ideally suited as the cornerstone of orientation programs for new hospital governing board members and executives.

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