Worcester Business Journal

4 Worcester Business Journal • January 18, 2016 www.wbjournal.com U Mass Memorial Health Care has been returned to an investment- grade status weeks before seek- ing $177 million in financing for future projects and refinancing of existing debt. The timing couldn't be more perfect as it dovetails with a financial environment that continues to be strong for borrow- ers, said Sergio Melgar, chief financial officer for UMass Memorial. Ratings open up the field UMass Memorial has received upgraded ratings of A- from Fitch Ratings, Ba1 from Moody's Investors Service and BBB+ from Standard & Poor's. These ratings are designed to give a simple system of gradation that allows potential investors to gauge the ability of an organization to meet its financial obligations. Simply put, the better the rating, the more attractive an organiza- tion is to investors, allowing an orga- nization to get a more competitive interest rate. That is exactly the impact that Melgar sees for UMass Memorial when it goes to raise $177 million to pay for facility upgrades and refi- nance existing debt through issuing tax- free bonds. The exact interest rate will be determined by the market on the day that UMass puts bonds out for investors, but the higher the credit rating means more people want to invest in the com- pany, because the debt is deemed to be that much more secure. It then becomes a matter of supply and demand, yielding UMass a better price than it would have received without the improved ratings. The importance of investment grade While the ratings from Fitch and S&P place the organization at the middle level of investment-grade status, the major goal was to get the system up and out of non-investment grade before financing future debt, Melgar said. While it was under junk status, the organization still did not have liquidity problems as it could always go to a bank, Melgar said, but in order to get access to organizations willing to invest in bonds, it needed investment status. Investors draw a hard line at investment grade. "The market for the people buying the bonds just went up, and the bigger mar- ket should then get us a better deal," Melgar said. "If there are a lot of people interested in our bonds, then that will drive the price (of borrowing) lower." An optimal market While these ratings open up a slew of potential investors, the true determina- tion of the final interest rate the organi- zation can secure will be determined by the bond market. While this fluctuates day to day, Melgar said, low interest rates combined with concerns in the stock market could mean excellent rates. "Our timing couldn't be better irre- spective of our rating," he said. UMass is not done improving, and with those improvements will come bet- ter rating scores, Melgar said. Much of it comes down to fundamental perfor- mance, and with UMass continuing to exceed its financial targets and working to retain its hold on the health market in, better ratings may be in the cards. n Worcester sale sets up manufacturer's $725K expansion The city of Worcester sold one of its parcels of land in the South Worcester Industrial Park for $10,000 to a local manufacturer Absolute Machinery Corp., marking the first sale of city- owned land in that area. The 28,266-square-foot parcel is next to Absolute's existing facility at 57 Southgate St., said Michael E. Traynor, the city's chief development officer, in a letter to City Manager Edward M. Augustus Jr. With the sale, Absolute will be able to begin a $725,000 expan- sion, adding 13,000 square feet of gross floor area to include space for adminis- trative offices; new showrooms; ware- house space and an internal loading dock. The expansion will allow Absolute to hire six new employees over the next three years, including professional engineers, metal techni- cians, licensed riggers and general laborers. The company will receive a 50-per- cent tax exemption on the increased property value, saving it about $64,000 in taxes over the 10-year tax-incre- ment-financing deal, which is consis- tent with Worcester's economic devel- opment plan for SWIP, according to Traynor. The city is estimated to collect $425,000 in taxes over the course of the agreement. Auburn bank location sells for $2M The property that houses the Santander Bank branch at 317 Washington St. in Auburn has been sold for over $2 million. The location was sold in October to The M Hill Companies by R&I Development LP of Clinton for $2.08 million, according to Glickman Kovago & Jacobs, which represented the sellers. The 3,725 square foot branch on 1.81 acres is located at intersection of Washington and Millbury streets. It is within one mile of the Auburn Mall and located next to more developable property. Boston private equity firm acquires Gulf Oil Boston-based private equity firm ArcLight Capital Partners closed on the acquisition of Framingham-based Gulf Oil LP Tuesday, according to a state- ment from both companies. The deal was closed under Chelsea Petroleum Product Holdings, an ArcLight affiliate. The acquisition coincides with Gulf Oil's sale of four petroleum terminals to New York City-based Arc Logistics Partners. The company has agreed to acquire the terminals in Pennsylvania from Gulf, satisfying requirements of the Federal Trade Commission that Gulf divest of the terminals before the sale to ArcLight, to avoid a monopoly. ArcLight and Arc Logistics are not affiliated. Rumors swirled in June that Cumberland Farms Inc. and Gulf Oil LP, also known as Cumberland Gulf Group, were in talks to sell the Gulf business, but a company spokesman declined to comment. On Wednesday, the companies issued a press release confirming the deal. Accounting firms merge The Certified Public Accounting firms of Stowe & Degon, LLC of Westborough and Caplice, Ciaramicoli & Doyle LLP of Milford have merged practices, with the company's main office to be housed in Westborough. The two companies merged on Jan. 1, and will be known as Stowe & Degon, LLC. The company will have a satellite office in Milford. The full-service pub- lic accounting and consulting firm cov- ers the New England area, according to a release. Prior to the merger, Stowe & Degon, LLC had 32 employees, including 26 CPA's. Company partner Michael Stowe announced that four manager-level professionals were added to the firm as part of the merger. These new employ- ees will bring depth to the company's tax and audit departments, he said in a statement. Waters partners with BioCity to launch UK lab Milford-based Waters Corporation has partnered with British bioscience incubator BioCity to launch an open access analytical laboratory at Alderly Park in Cheshire, England, with the hopes of giving Waters better insight into customer needs. Located in the BioHub at Alderly Park, a collaborative research and development center, the lab will offer Waters' informatics technologies, state- of-the-art liquid chromatography and mass spectrometry as well as a suite of analytical platforms to scientists who work in pharmaceuticals or life scienc- es. It will also be stocked with Waters' latest technology offerings and a nucle- ar magnetic resonance system provided by Manchester Science Partnerships, the Park's owners. The laboratory is scheduled to open in early 2016. Protonex receives Army's power manager order Protonex, the Southborough-based subsidiary of Ballard Power Systems, received a follow-on purchase order from the U.S. Army for more than 400 power manager special operations kits, a sale valued at approximately $2.8 mil- lion. REGIONAL BRIEFS Verbatim ""You've got these major, world-ranked institutions that have played a big role in terms of churning out some very, very well-qualified, bright people." Nariman Behravesh, chief economist at IHS Inc. in Lexington, discussing why Massachusetts beat out California as the country's most innovative economy. >> "An improved economy and a strong desire to live in Massachusetts pushed pending home sales up over last year despite the low number of homes for sale." Annie Blatz, Massachusetts Association of Realtors president, addressing 2015 pending home sales that grew by approximately 10 percent over 2014. >> "In an ideal world, we really think that physicians should be allowed to apply their clinical judgment ... But we realize there's also a very specific crisis situation ... so we are willing to be open-minded." Dr. Dennis Dimitri, Massachusetts Medical Society president, commenting on measures to adress opioid abuse. >> In Review CENTRALMASS >> Continued on next page UMass Memorial returns to investment grade at perfect time Dr. Eric Dickson, CEO and president, UMass Memorial Health Care

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