Standard & Poor’s last week revised the outlook to stable from negative on Morris Hospital and Healthcare Centers’ BBB-plus rating on $11 million of debt.
The hospital has $7.2 million of bonds that sold in 2001 and $3.6 million that sold in 1999 through the Upper Illinois River Valley Development Authority and village of Channahon, respectively.
The rating agency shifted the outlook to negative in September 2006 due to the hospital’s plans to issue new debt for capital spending. Since then, however, Morris Hospital has revised its plans and strategic priorities and has delayed some new projects in order to focus on strengthening its clinic presence and regional market share.
Analyts said the rating reflects Morris Hospital’s solid business position as the sole hospital in Grundy County, where it enjoys a 56.7% market share. It also reflects growing levels of unrestricted liquidity, with about 165 days’ cash on hand as of the close of last year. It also benefits from a historically strong maximum annual debt service coverage ratio of five times, although weaker operating performance in 2007 resulted in a softer but sound 3.8 times level. The region also continues to grow in tandem with growth of the southern suburbs of Chicago.
Offsetting the strengths is the hospital’s fluctuating operating trends, with a soft 1.7% operating margin for fiscal 2007. It also faces increased competition as other facilities expand their reach into Grundy County.
“The stable outlook reflects Morris Hospital’s business position in the area, growth of the service area, and historically solid performance and debt service coverage,” wrote analyst Suzie Desai. “While there are some concerns regarding Morris’ fiscal 2007 operating performance, interim fiscal 2008 does appear to be favorable and tracking ahead of budget.”
The report warned that a downgrade is possible if competition increases and affects financial performance, or if Morris’ future capital plans have a negative effect on its balance sheet.
