Bangkok--26 Jan--Standard & Poor's
Standard & Poor's Ratings Services revised its outlook on the underlying rating (SPUR) on Richmond Hospital Authority, Ind.'s debt, issued for Reid Hospital, to negative from stable based on a much-more-limited balance sheet than originally expected due primarily to weaker investment markets, coupled with a potentially slow return of the balance sheet to historical levels with the possibility of a weaker-than-expected performance over the next few years.
The rating service also assigned its 'AA-' standard long-term rating, and stable outlook, to the authority's $97.075 million series 2009 fixed-rate hospital revenue bonds, issued for Reid Hospital & Health Care Services.
At the same time, Standard & Poor's affirmed its 'AA-' SPUR on the authority's series 2005A variable-rate demand bonds, issued for Reid Hospital, and its 'AAA/A-1+' rating on the authority's series 2005B and 2005C variable-rate demand bonds, issued for Reid.
The negative outlook reflects Reid Hospital's weakened balance sheet, coupled with operating performance forecast at lower-than-historical levels, which, coupled with potentially weaker investment income returns, could slow the balance sheet's return to levels consistent with the rating.
"If Reid officials cannot generate strong enough financial operations to improve the balance sheet to levels more consistent with the rating within the next one to two years, we will likely lower the rating," said Standard & Poor's credit analyst Suzie Desai.
The 'AAA' standard long-term rating on the series 2005B and 2005C bonds is based on a municipal bond insurance policy provided by Financial Security Assurance. The 'A-1+' short-term rating on the series 2005B and 2005C bonds is based on Reid Hospital's self-liquidity.
Factors supporting the 'AA-' rating reflect Reid's strong regional business position as the only hospital in Wayne County with more than an 80% market share in the primary service area and an increasing focus on tertiary services for the region, successful completion of its replacement hospital project that opened in September 2008 with minimal capital expenditures expected over the next two to three years, adequate pro forma maximum annual debt service coverage expected over the next few years of 3.1x and an even slightly higher 4.5x when excluding the $5.7 million long-term bullet payment due in 2025, and still-solid levels of unrestricted liquidity equal to 292 days' cash on hand.
Offsetting factors include Reid's much-softer operating performance in fiscal 2008 as Reid's new hospital came online with weak excess income due to realized investment losses; less balance sheet flexibility with the declines in unrestricted cash resulting in a decrease in the cash-to-pro-forma-long-term-debt ratio to just around 100%; and location in an area with limited population growth, moderately high unemployment of 6.6%, and a growing concentration of Medicare payors, as well as increasing bad debt expense, which could have an adverse effect on reimbursement in the future.
The rating action affects roughly $175 million of debt outstanding.
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 Find a Rating.
Media Contact:
Edward Sweeney, New York (1) 212-438-6643, [email protected]
Analyst Contacts:
Suzie Desai, Chicago (1) 312-233-7046
Geraldine Poon, San Francisco (1) 415-371-5078
Key Contacts:
Americas Media Relations: (1) 212-438-6667
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Americas Customer Service: (1) 212-438-7280
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