Cleveland Clinic Health System Obligated Group - FMSbonds.com

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MASTER NOTEBONDS OR OTHER OBLIGATIONSPRINCIPAL AMOUNTOUTSTANDING, ASADJUSTEDTwenty-Eighth Master Note Hospital Revenue Bonds, Series 1999B (Cleveland Clinic$45,010,000Health System Obligated Group)Thirty-Fifth Master Note Cuyahoga County, Ohio Revenue Bonds, Series 2003A$513,970,000(Cleveland Clinic Health System Obligated Group)Thirty-Ninth Master Note Collier County (Florida) Health Facilities Authority Revenue$41,905,000Bonds, Series 2003C (Cleveland Clinic Health SystemObligated Group)Fortieth Master Note 1 Reimbursement Obligation N/AForty-First Master Note 1 Reimbursement Obligation N/AForty-Second Master Note Swap Obligation N/AForty-Third Master Note Swap Obligation N/AForty-Sixth Master NoteCuyahoga County, Ohio Revenue Bonds, Series 2004B(Cleveland Clinic Health System Obligated Group)$200,000,000Forty-Seventh Master Note 2 Reimbursement Obligation N/AForty-Eighth Master Note 2 Reimbursement Obligation N/AFiftieth Master Note Swap Obligation N/AFifty-First Master Note Swap Obligation N/AFifty-Fifth Master Note 3 Reimbursement Obligation $11,645,000Fifty-Sixth Master Note Swap Obligation N/AFifty-Ninth Master Note 2 Reimbursement Obligation N/ASixtieth Master Note Series 2008A Bonds $452,340,000Sixty-First Master Note 4 Variable Rate Bonds $670,000,000Sixty-Second Master Note 4 Reimbursement Obligation N/ASixty-Third Master Note 4 Reimbursement Obligation N/ASixty-Fourth Master Note 4 Reimbursement Obligation N/ASixty-Fifth Master Note 4 Reimbursement Obligation N/ATotal: $1,934,870,0001234The Fortieth and Forty-First Master Notes were issued to the related credit facility providers for the Series 2003C Bonds for the purpose of securingthe Obligated Issuers’ reimbursement obligations to such credit facility providers in the event such credit facility providers are required to make anypayment in respect of principal, interest or the tender price of any Series 2003C Bonds.The Forty-Seventh, Forty-Eighth and Fifty-Ninth Master Notes were issued to the related liquidity facility providers for the Series 2004B Bonds forthe purpose of securing the Obligated Issuers’ reimbursement obligations to such liquidity facility providers in the event such liquidity facilityproviders are required to make any payment in respect of tender price of any Series 2004B Bonds. In addition to a principal component equal to theprincipal amount of the Series 2004B Bonds shown in the table above, each such Master Note includes in its par amount the interest componentassociated with the related bank’s obligation to fund interest for a period of days with respect to the related Series 2004B Bonds, which interestcomponent is not reflected in the amounts included in the table above.The Fifty-Fifth Master Note was issued to the related liquidity facility providers for the $11,645,000 outstanding principal amount Cuyahoga County,Ohio Multi-Mode Variable Rate Civic Facility Revenue Bonds, Series 2002 (Cleveland Health Museum Project) (the “HealthSpace Bonds”), whichare not issued under the either the Bond Indenture or the County Bond Indenture, but the obligations with respect to which were assumed by theCleveland Clinic in connection with the acquisition in 2006 of the facilities of the Cleveland Health Museum known as “HealthSpace.” The Fifty-fifthMaster Note secures the Obligated Issuers’ reimbursement obligations to such liquidity facility provider in the event such liquidity facility provider isrequired to make any payment in respect of tender price of any HealthSpace Bonds. In addition to the principal component of the HealthSpace Bondsrelated to the Fifty-fifth Master Note, such Master Note includes in its par amount the interest component associated with the related bank’s obligationto fund interest for a period of days with respect to the HealthSpace Bonds, and such component is not reflected in the par amount listed in the tableabove.The Sixty-Second through and including the Sixty-Fifth Master Note will be issued to banks that provide lines of credit to the Cleveland Clinic inconnection with the Cleveland Clinic’s plans to provide self-liquidity for any Variable Rate Bonds which are tendered pursuant to their terms.16
The Cleveland Clinic regularly reviews the relative amounts of its fixed and variable rate indebtedness.The Cleveland Clinic may consider entering into one or more interest rate swap agreements to adjust its mix ofindebtedness. It is anticipated that the Cleveland Clinic’s payment obligations under any such interest rate swapagreements would be secured by additional Master Notes issued pursuant to the Master Trust Indenture.Pursuant to the Master Trust Indenture, the Sixtieth Master Note and the Variable Rate Note will be issuedon a parity with the outstanding Master Notes.The revenues and expenses of all members of the Combined Group, that is, the Obligated Issuers and theGroup Affiliates, are combined for purposes of the financial tests set forth in the Master Trust Indenture. Theoperational and financial restrictions and contractual obligations of the Master Trust Indenture apply directly only toObligated Issuers. Each Obligated Issuer covenants to cause any Group Affiliate that it controls to abide by suchrestrictions and covenants. The Master Trust Indenture does not obligate any Group Affiliate on any Master Note.Rather, the Master Trust Indenture provides that each Master Note is a joint and several obligation of each ObligatedIssuer and the full faith, credit and revenues of the Obligated Group are committed for payment of each Master Noteincluding such moneys as may, in accordance with law, be realized by liquidation or other drawing on all of theassets and investments of the Combined Group, including such moneys as may be derived from Group Affiliates.See “APPENDIX C — SUMMARY OF BASIC DOCUMENTS — The Master Trust Indenture.” At present, thereare not any “Group Affiliates” under the Master Trust Indenture.In determining compliance with a number of provisions of the Master Trust Indenture, the ObligatedIssuers may assume that certain types of Indebtedness that bear interest at variable rates and which may not bepayable over an extended term on a level annual debt service basis will in fact bear interest over a long term and willbe amortized on a level debt service basis. The actual interest rates and payments on such Indebtedness will in alllikelihood vary from such assumptions, and such variance may be material. See “APPENDIX C — SUMMARYOF BASIC DOCUMENTS — The Master Trust Indenture — Negative Lien Covenant,” “— Transfers of Property,”“— Rate Covenant”, “— Permitted Indebtedness” and “— Merger and Consolidation.” The Master Trust Indentureprovides that certain tests must be met before Obligated Issuers and Group Affiliates may be added to, or withdrawnfrom, the Combined Group. See “APPENDIX C — SUMMARY OF BASIC DOCUMENTS — The Master TrustIndenture — The Combined Group.”Upon the issuance of the Series 2008A Bonds and the Variable Rate Bonds, the Cleveland Clinic, CCHS-East Region, Fairview, Lutheran, Marymount and Florida Clinic will be the only Obligated Issuers and the onlymembers of the Combined Group under the Master Trust Indenture. See “APPENDIX C — SUMMARY OFBASIC DOCUMENTS — The Master Trust Indenture – The Combined Group” for information regarding theability of an entity to be added as an Obligated Issuer or Obligated Issuers or the ability of Obligated Issuers towithdraw from the Obligated Group. The foregoing notwithstanding, the Cleveland Clinic has covenanted that itwill not withdraw from the Obligated Group as long as the Series 2008A Bonds are outstanding.Security Interest in Gross ReceiptsThe Obligated Issuers have granted a security interest to the Master Trustee in their Gross Receiptspursuant to the Master Trust Indenture as security for all of the Master Notes outstanding thereunder, including theSeries 2008 Master Notes. Gross Receipts are defined as all accounts and assignable general intangibles (other thanthose general intangibles that may not be assigned under the law) now owned or hereafter acquired by any Memberof the Obligated Group regardless of how generated and all proceeds therefrom, whether cash or non-cash, all asdefined in Article 9 of the Uniform Commercial Code (as amended) of the applicable jurisdictions, excluding,however, gifts, grants, bequests, donations, contributions and pledges to any Obligated Issuer heretofore or hereaftermade, and the income and gains derived therefrom, which are specifically restricted by the donor or grantor to aparticular purpose which is inconsistent with its use for payments required on the Master Notes. Accountsreceivable of the Obligated Issuers which constitute Gross Receipts may be sold or pledged if such sale or pledge ismade in accordance with the provisions of the Master Trust Indenture. Under the Master Trust Indenture, accountsreceivable may be sold or pledged despite the security interest of the Master Indenture. The lien created under theMaster Trust Indenture on Gross Receipts would terminate and be immediately released with respect to any accountsreceivable that are so sold or pledged. See the discussion below under “Additional Liens.”17
Page 1 and 2: NEW ISSUEBOOK ENTRY ONLYSee “RATI
Page 3 and 4: TABLE OF CONTENTSINTRODUCTORY STATE
Page 5 and 6: OFFERING CIRCULARRelating to$452,34
Page 7 and 8: Security and Sources of Payment for
Page 9 and 10: Upon issuance of the Series 2008A B
Page 11 and 12: (ii) acquisition of magnetic resona
Page 13 and 14: $147,200,000 Term Bonds Due January
Page 15 and 16: that the redemption is conditional
Page 17 and 18: Use of Certain Terms in Other Secti
Page 19: County BondsThe Cleveland Clinic an
Page 23 and 24: ESTIMATED SOURCES AND USES OF FUNDS
Page 25 and 26: DEBT SERVICE COVERAGEThe following
Page 27 and 28: MedicareGeneralApproximately 29% of
Page 29 and 30: there is no assurance that the Obli
Page 31 and 32: Medicare Conditions of Participatio
Page 33 and 34: fiscal year’s budget that are in
Page 35 and 36: Federal Regulatory and Contractual
Page 37 and 38: Stark-type statutes have fewer exce
Page 39 and 40: party or for any services rendered
Page 41 and 42: typically in a position to refer pa
Page 43 and 44: OhioOhio Certificate of Need Progra
Page 45 and 46: performance demonstration programs
Page 47 and 48: manifest injustice would otherwise
Page 49 and 50: and properties owned or operated by
Page 51 and 52: plan of reorganization, with one ex
Page 53 and 54: percentage may be composed wholly o
Page 55 and 56: The Internal Revenue Service Form 9
Page 57 and 58: Charity Care, Underinsured and Unin
Page 59 and 60: • Proposals to eliminate the tax-
Page 61 and 62: acting in the capacity of underwrit
Page 63 and 64: Frederick R. Nance, Regional Managi
Page 65 and 66: FINANCIAL POSITION — D. BALANCE S
Page 67 and 68: The CommissionBecause the Series 20
Page 69 and 70: APPENDIX ACLEVELAND CLINIC HEALTH S
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TABLE OF CONTENTSPageINTRODUCTION .
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This Appendix to the Offering Circu
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A. ORIGINS AND FUNDAMENTAL MISSIONT
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C. GOVERNANCE OF THE CLEVELAND CLIN
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Voting Members of theBoard of Trust
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Voting Members of theBoard of Trust
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Principal Operating Officers. The d
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In addition to the broad range of o
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The main campus also includes a com
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GovernanceThe Cleveland Clinic is t
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E. UTILIZATIONThe following tables
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Statistical Information. The follow
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I. COLLABORATIVE PROGRAMSIn additio
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Clinic’s charity care policy, see
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statements filed with Digital Assur
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CLEVELAND CLINIC HEALTH SYSTEMConso
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OBLIGATED GROUPConsolidated Stateme
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PART IV.MANAGEMENT’S DISCUSSION A
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increase in minor equipment purchas
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The following table sets forth the
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pension plans’ funded status in t
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of funding to the pension plan offs
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portfolio. Offsetting the decrease
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• Clinic Care, Inc. (“Clinic Ca
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APPENDIX BCERTAIN FINANCIAL STATEME
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A UDITED C ONSOLIDATED F INANCIAL S
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• Ernst & Young LLPSuite 1300925
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Liabilities and net assetsCurrent l
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Changes in Net AssetsNet AssetsTemp
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Cleveland Clinic Health SystemNotes
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Other Financial Information
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• Ernst & Young LLPSuite 1300925
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Cleveland Clinic Health SystemConso
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Cleveland Clinic Health SystemConso
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APPENDIX CSUMMARY OF BASIC DOCUMENT
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APPENDIX CSUMMARY OF BASIC DOCUMENT
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“Bond Indenture” means the Bond
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period of three months from the com
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PROPERTY”, and all improvements,
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direct, express or charitable trust
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Rate Hedge” for purposes of this
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Debt according to a fixed schedule
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“Officer’s Certificate” means
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provided, however, that Series 2008
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(t) liens on money or obligations d
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Project Administrator. In the event
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“Stated Maturity” means, when u
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(b) the Cleveland Clinic, or if the
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(d) the Master Trustee receives an
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(g) the loan of cash or other non-O
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under this caption shall be deemed
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Supplemental Indenture to which suc
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emedy thereunder, unless the Noteho
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purchase or other acquisition or re
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limitation, (A) the Special Funds a
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(b) Default in the payment of the p
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Fund Requirements, in the order of
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(g) to evidence the appointment of
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THE LEASEThe Lease contains various
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(a) Failure by the Cleveland Clinic
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APPENDIX DPROPOSED FORM OF OPINION
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PROPOSED TEXT OF LEGAL OPINION OFSQ
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October __, 2008Page 32008A Bonds c
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