University in Nashville Doubles Debt to Build New Medical School

Nashville’s Belmont University is more than doubling its debt to build classrooms for a not-yet-accredited new medical school, aiming to help alleviate a nationwide doctor shortage.

(Bloomberg) — Nashville’s Belmont University is more than doubling its debt to build classrooms for a not-yet-accredited new medical school, aiming to help alleviate a nationwide doctor shortage.  

The Health and Educational Facilities Board of The Metropolitan Government of Nashville and Davidson County sold $187.5 million of municipal bonds on behalf of Belmont. Proceeds will be used to construct laboratories and classrooms for a school “focused on training diverse physician leaders who embrace and value a whole-person approach to healing,” according to the bond-offering documents. A portion of funds will also be used to finance the construction of a 719-bed residence hall.

The offering priced on Wednesday with yields across the curve lowered from levels initially offered to investors, a trend usually indicative of strong demand. A security due in 2048 repriced with a 5.25% coupon and a 4.63% yield, roughly 7 basis points lower than preliminary pricing, according to pricing information viewed by Bloomberg.

The new medical school will be affiliated with HCA Healthcare Inc., the largest US hospital chain. HCA didn’t respond to a request for comment. 

The Thomas F. Frist, Jr. College of Medicine is named after a co-founder of HCA and brother of former Senate majority leader Bill Frist. It’s scheduled to open next year. The hospital chain has helped make health care the largest industry in the Music City.  

“The addition of a medical school certainly is a reflection of the need out there in US health care for doctors and other medical professionals,” said Gabe Diederich, a portfolio manager at Robert W. Baird & Co. That is especially true in fast-growing areas like Nashville, he said. 

The new bonds will bump Belmont’s outstanding debt to about $314 million, from $128.7 million as of last May, according to S&P Global Ratings. S&P assigned an A rating to the debt, pointing to recent application and enrollment increases and “extraordinary operating performance.” 

Founded as a women’s college in 1890, Belmont says it aims to become “the leading Christ-centered university in the world.” The medical school is only the latest in a raft of new programs, including a law school founded in 2011 and a merger with the Watkins College of Art in 2020.

No longer affiliated with a particular denomination, the university had a 56-year link with the Tennessee Baptist Convention, which eventually sued because Belmont wanted to add non-Baptists to its board. Under the terms of Belmont’s $11 million settlement in 2007, it agreed to pay the convention $1 million, then $250,000 annually for 40 years.   

“Belmont is a good regional brand,” said Diederich. “That should certainly help in this new venture for the university.” 

Despite a shrinking number of high-school graduates that has pressured college enrollments, students still see medical school as a good investment, he added. 

An aging population is also heightening the need for doctors, with many near retirement age and others leaving the field after the stress of the pandemic, according to the Association of American Medical Colleges, which forecast a shortage of up to 124,000 physicians by 2034.


Bond investors must still recognize the risks that can come with the deal, Diederich said, noting construction risk, general execution and even things like going through the accreditation process. 

Belmont has just under 9,000 students, most in its undergraduate programs. Undergraduate tuition and fees were $39,850 last year, compared with more than $60,000 for some elite schools. 

Belmont expects a decision on preliminary accreditation for the medical school in October, according to bond documents. It’s one of only six medical schools that have applied for accreditation currently, according to Association of American Medical Colleges spokesperson Stuart Heiser, while 31 new MD-granting programs have opened in the past 15 years.  

The sale is being managed by Truist Securities Inc., which declined to comment. Belmont also declined to comment. 

(Updates with pricing information in third paragraph.)

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