Bangkok--14 Jun--Standard & Poor's
Standard & Poor's Ratings Services assigned its 'AA' long-term rating to Washington Health Care Facilities Authority's series 2010A $176.33 million revenue bonds issued on behalf of Providence Health & Services Obligated Group (PH&S), Wash. In addition, Standard & Poor's affirmed its 'AA' long-term rating and underlying rating (SPUR) on PH&S's outstanding debt from various issuers as well as its 'AA/A-1+' rating on Clackamas County Hospital Facilities Authority's series 2003D-G bonds. Standard & Poor's also affirmed its 'A-1+' short-term rating on PH&S's existing commercial paper (CP) program.
In our view, the rating reflects PH&S's status as one of the nation's largest not-for-profit health care providers with roughly $7.7 billion in annual revenues, demonstrating solid geographic and financial dispersion, and a strong business position in all of its major markets as well as strong, solid, and consistent operating profitability for many years and a capable management team.
A higher rating is precluded by a balance sheet that in our view, while improved over recent low points, is not consistent with a higher rating, due to moderate leverage and liquidity, combined with reduced but still sizable pension funding needs.
Credit factors supporting the 'AA' rating include PH&S's record of strong and consistent operating performance averaging more than a 4% operating margin annually for many years, combined with strong revenue growth; significant revenue and risk dispersion, with 27 acute-care hospitals and a variety of related institutions in Alaska, California, Montana, Oregon, and Washington, with a strong business position and performance in each of its markets and at its health plan, combined with solid utilization trends; and a sound management team that is forward-looking, willing to make difficult decisions, and focused on quality issues as well.
"The stable outlook reflects our assessment of PH&S's record of consistent operating performance, strong business position, and good operating cash flow," said Standard & Poor's credit analyst Martin Arrick. "The stable outlook also reflects our belief that that any strategic growth will be consistent with management's intent to maintain a financial profile consistent with the 'AA' category," said Mr. Arrick.
According to Standard & Poor's, further balance sheet strengthening while maintaining operating performance could lead to a positive outlook or rating change, while a sharp decline in operating financial performance and balance sheet metrics could lead to a negative outlook or rating change.
RELATED CRITERIA AND RESEARCH
USPF Criteria: Not-For-Profit Health Care, June 14, 2007
General Criteria: Methodology: The Interaction Of Bond Insurance And Credit Ratings, Aug. 24, 2009
USPF Criteria: Commercial Paper, VRDO, And Self-Liquidity, July 3, 2007
Complete ratings information is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and 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. Use the Ratings search box located in the left column.
Media Contact:
Ana Sandoval, New York (1) 212-438-5095,
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Analyst Contacts:
Martin D Arrick, New York (1) 212-438-7963
Geraldine Poon, San Francisco (1) 415-371-5078
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