Fitch Ratings last week removed its “rating watch evolving” designation from Novant Health’s revenue bonds and affirmed its AA-minus rating with a stable outlook. The change affected $757 million of revenue bonds issued for Novant by the North Carolina Medical Care Commission.
Fitch placed Novant on watch April 1 after it announced it would purchase a 27% stake in seven hospitals owned by Health Management Associates Inc. for $300 million.
“The affirmation is based on Novant’s sustained profitability leading to a strong financial profile, solid market position, extensive physician network, integrated delivery platform, and its history of successful integration of acquisitions,” said a report by Fitch analyst Anthony A. Houston.
Fitch does not consider the HMA partnership to be dilutive to Novant’s credit quality, Houston’s report said.
The stable outlook reflects “Fitch’s understanding that Novant has plans to issue refunding bonds in the latter half of 2008 along with an additional $150 million to $200 million in taxable debt associated with the HMA venture.”
Novant also has plans to use approximately $150 million to $200 million of additional debt in 2009 to fund core business capital reinvestment, Houston said, noting that negative rating pressure could ensue if operating results do not match historical levels due to increased costs and/or risks associated with the integration of the acquired assets.
Novant, headquartered in Winston-Salem, is a regional integrated system with nine hospitals anchored by Forsyth Medical Center in Winston-Salem and Presbyterian Hospital in Charlotte. In fiscal 2007, Novant had total operating revenues of $2.25 billion.
