Bangkok--10 Jun--Standard & Poor's
Standard & Poor's Ratings Services revised the rating outlook to stable from negative and affirmed its 'BBB' rating and underlying rating (SPUR) on Hillsboro Hospital Facilities Authority, Ore.'s bonds (series 2001 and series 2004) issued for Tuality Healthcare (Tuality).
"The outlook change reflects our view of Tuality's growth in unrestricted liquidity and improved profitability despite continued volume declines," said Standard & Poor's credit analyst Kenneth Gacka.
The ratings reflect our view of Tuality's:
- Decreased inpatient volume in each of the last three fiscal years and a sizable drop in total surgeries since fiscal 2008;
- Competitive service area that has seen an increase in new ambulatory surgery centers over the last few years; and
- Maximum annual debt service coverage that is low compared to comparably rated hospitals, with 2.2x coverage based on unaudited year-to-date financials (seven months ended April 30, 2011).
Partially mitigating the preceding weaknesses is our opinion of Tuality's:
- Good business position in a growing market, with a 38% market share in its primary service area;
- Improved operating margins of 1.3% and 1.6% for the unaudited year-to-date period and fiscal 2010, respectively;
- Strengthened liquidity, with 105 days' cash on hand at April 30, 2011, compared with only 65 days at the end of fiscal 2008; and
- Modest debt load and lack of near-term plans for additional debt, with leverage of about 22% and cash to debt of 192% at April 30, 2011.
At April 30, 2011, Tuality had $21.0 million of total long-term debt outstanding.
RELATED CRITERIA AND RESEARCH
USPF Criteria: Not-For-Profit Health Care, June 14, 2007
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
Media Contact:
Edward Sweeney, New York (1) 212-438-6634,
[email protected]
Analyst Contacts:
Kenneth T Gacka, San Francisco (1) 415-371-5036
Geraldine Poon, San Francisco (1) 415-371-5078