Bangkok--26 Nov--Standard & Poor's
Standard & Poor's Ratings Services assigned its 'AA-' standard long-term rating to Allegheny County Hospital Development Authority's, Pa.'s $350 million series 2008C revenue bonds, issued for the University of Pittsburgh Medical Center (UPMC)--a regional health care system centered in Pittsburgh, Pa. At the same time, Standard & Poor's affirmed its 'AA-' standard long-term rating and 'AA-' underlying rating (SPUR) on the various bonds issued for UPMC and affirmed its dual ratings of 'AA-/A-1+' on various UPMC bonds.
The 'AA-' rating reflects continued business and market share growth within UPMC's large western Pennsylvania service area, supported by the acquisition of Mercy Hospital in fiscal 2008, ongoing capital investments, a strong reputation, brand-name recognition, several highly visible subsidiary facilities, and comprehensive service offerings, including women's, children's, cancer, rehabilitation, behavioral health, and transplant services. Other credit strengths include UPMC Health Plan's success as a force in the region's insurance market and as a viable competitor of Highmark in the greater Pittsburgh metropolitan region; a solid financial profile, highlighted by historically solid operating performance and debt service coverage, demonstrated by the audited fiscal 2007 results, although fiscal 2008 performance is weaker; and an improved balance sheet through fiscal 2007 highlighted by historical improvements in liquidity, moderate leverage despite the added debt, and recent increases in net property, plant, and equipment offset by weaker metrics in the current year. A sound management team, which has kept UPMC very well positioned within its market as the region's dominant provider, demonstrating the ability to divest nonperforming assets when needed and developing several nontraditional service lines, including the UPMC Health Plan also supports the rating.
Rating concerns are largely driven by weak investment performance although soft regional demographics are a longer-term concern.
"Potential failure to return to historically sound performance as demonstrated for many years or a further weakening of the balance sheet could cause us to revise our outlook or lower our rating on UPMC's debt, although as demonstrated this year, the rating can tolerate some year-to-year softness in investment results," said Standard & Poor's credit analyst Martin Arrick. "However, margin improvement combined with no further deterioration in the balance sheet is necessary for rating and outlook maintenance and upward movement in the rating is not expected in the near to medium term," said Mr. Arrick.
Complete ratings information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; select your preferred country or region, then Ratings in the left navigation bar, followed by Credit Ratings Search.
Media Contact:
Edward Sweeney, New York, (1) 212-438-6634
[email protected]
Analyst Contacts:
Martin D Arrick, New York (1) 212-438-7963
Liz Sweeney, New York (1) 212-438-2102