Standard & Poor’s last week revised its outlook on Ministry Health Care Inc.’s A-plus credit to negative from stable due to weak debt coverage levels, in a review prompted by the provider’s $120 million new issue.
The system is using a variable-rate structure on the deal being sold through the Wisconsin Health and Educational Facilities Authority.
“The outlook revision reflects weak debt service coverage for the rating category at 2.4 times for fiscal 2008, a smaller-than-expected operating margin for fiscal 2008, and continued operational challenges in fiscal 2009,” wrote analyst Brian Williamson.
Positive factors include 180 days’ cash on hand, a solid market share of 52%, and an experienced and stable management team.
Standard & Poor’s issued separate ratings on the two tranches that make up the new deal. The $95 million of Series A bonds received an AAA/A-1-plus based on a pledge of and lien on the unrestricted accounts receivable of Ministry and a letter of credit from U.S. Bank NA. The $23 million of Series B debt received a rating of A-plus/A-1 based on Ministry providing self-liquidity.
Ministry operates 15 acute-care facilities with 1,267 beds, 51 clinics, and three long-term care facilities with 130 staffed beds.
