Bangkok--7 Sep--Standard & Poor's
Standard & Poor's Ratings Services assigned its 'AA-' long-term rating to New Mexico Hospital Equipment Loan Council's $134.135 million fixed-rate series 2009A bonds, issued for Presbyterian Healthcare Services (PHS). The outlook is stable. In addition, we affirmed our 'AA-' long-term rating and underlying rating (SPUR) on New Mexico Hospital Equipment Loan Council's $393.865 million (various series) bonds, issued for PHS.
Bond proceeds of $134 million will fund continued construction of PHS' new Presbyterian Rio Rancho Medical Center. Additional funding will come from philanthropy (about $20 million) and cash (about $15 million).
"The long-term 'AA-' rating reflects our opinion of PHS' solid operations in fiscal 2009 to date (unaudited seven-month results through July 31 (with an operating margin of 5.2%), which generated very good pro forma MADS coverage of 4.5x; favorable market position as the leading provider of health care services in Albuquerque and the State of New Mexico, with increasing utilization trends; solid balance sheet, with pro forma cash to debt of more than 1.6x, moderate pro forma leverage of 38%, and solid operational liquidity of 174 days' cash on hand based on results for fiscal 2009 to date; and a solid management team that has expressed a focus on clinical outcomes and customer loyalty," said Standard & Poor's credit analyst Kevin Holloran.
PHS will have approximately $537 million in outstanding long-term debt, secured by the gross revenues of the obligated group (which accounts for about 70% of PHS' net assets). The group includes PHS' two Albuquerque hospitals (not including Presbyterian Rio Rancho ED, which is licensed for four beds), three regional hospitals, an ambulance company, the Presbyterian Medical Group, and the Presbyterian Healthcare Foundation. Given PHS' integrated nature, our analysis covers all of PHS, which includes the non-obligated Presbyterian Health Plan.
Standard & Poor's assigned PHS a Debt Derivative Profile score of '1.5' on a scale of '1' to '4', with '1' representing the lowest risk, for its four outstanding swaps. This score indicates our view of very low risk to the overall credit profile.
The stable outlook reflects our opinion of PHS' sound business position and market share, solid record of operating profitability, and very good unrestricted liquidity. With the recent strengthening of the balance sheet (both unrestricted cash and unrestricted net assets), PHS is able to incorporate this additional debt at the current rating level. We expect sound operating results to persist, and we expect good cash to continue to strengthen the balance sheet over the intermediate term. Upward rating potential is limited at this time, given our expectation of heightened capital spending over the near term. Conversely, downward rating pressure would present itself should operations significantly deteriorate or should PHS' balance sheet come under additional pressure.
RELATED RESEARCH
USPF Criteria: "Not-For-Profit Health Care," June 14, 2007
Complete ratings information is available to RatingsDirect subscribers 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:
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contacts:
Kevin Holloran, Dallas (1) 214-871-1412
Geraldine Poon, San Francisco (1) 415-371-5078
Key Contacts:
Americas Media Relations: (1) 212-438-6667
media_ [email protected]
Americas Customer Service: (1) 212-438-7280
[email protected]