Children’s Hospital Rated

Standard & Poor’s last week rated Children’s Memorial Hospital in Chicago A-minus, as the hospital works on plans to sell about $430 million of debt this spring, the first leg of financing for its $1 billion, 288-bed replacement hospital.

The hospital also received Chicago City Council approval on zoning changes needed to build the facility downtown on the campus of Northwestern University’s Feinberg School of Medicine and Prentice Women’s Hospital.

The A-minus credit was assigned to $187 million of outstanding, insured debt issued in 1993, 1999, and 2003 that had not previously carried public ratings. Fitch Ratings recently assigned a AA-minus to the credit.

“The stable outlook reflects our expectation that Children’s Memorial Hospital will maintain its solid balance sheet,” wrote Standard & Poor’s analyst Brian Williamson.

The A-minus reflects the hospital’s good business and market position with about 15% market share, a solid management team, the anticipated strengthening of the relationship between CMH and Northwestern Memorial Hospital as a result of the move, and a solid liquidity position boosted by strong fundraising results.

Other factors that offset the credit’s strengths include an increasing Medicaid patient mix, low reimbursement from Medicaid, and construction risk associated with the project.

Founded in 1882, the hospital had long considered plans to either renovate its current facility in the Lincoln Park neighborhood or build a new one to accommodate growing demand for its services.

Children’s Memorial will sell the $430 million through the Illinois Finance Authority. Goldman, Sachs & Co. and Morgan Stanley are underwriters. Kaufman, Hall & Associates Inc. is financial adviser. Jones Day would serve as bond counsel.

The project is being financed with the bond proceeds, $346 million of cash, and $248 million of donations. Ground-breaking is set for spring and the facility would open in 2012, pending remaining regulatory approval from the Illinois Health Facilities Planning Board.

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