Provena Health Stabilizes

Two rating agencies have revised Provena Health’s outlook to stable from negative ahead of its $126 million debt restructuring that took place on Monday.

Along with the outlook changes, Moody’s Investors Service affirmed Provena’s Baa1 rating and Standard & Poor’s affirmed its BBB-plus. The system has a total of $639 million of debt. The bonds are being sold through the Illinois Finance Authority.

“The ratings reflect Provena’s positive unaudited operations through the 11 months ended Nov. 30, 2009, pro forma maximum annual debt service coverage that is slightly above two times for the same period, and increasing liquidity,” said Standard & Poor’s analyst Suzie Desai.

“We believe Provena still faces operating challenges .… However, the revision of the outlook to stable reflects the implementation of significant savings initiatives and benefits from multiple restructurings of the debt structure, both of which have provided some relief and stability at the current rating level,” Moody’s wrote.

The initiatives were expected to save $76 million last year and $91 million in 2010. Provena hired Wellspring Capital Management in 2008 to help implement a turnaround strategy.

The system’s challenges include ­maintaining its improved operations, volume declines due in part to competition and economic challenges, and a modest cash position. Provena operates six hospitals, 16 long-term care and senior facilities, and 28 clinics in Illinois and Indiana.

Provena has three swaps, including one for $97 million that will be terminated as part of the upcoming transaction. As of Dec. 31, 2009, the total mark-to-market on the three swaps was a negative $29.7 million and Provena posted $23.5 million in collateral, Moody’s wrote.

Goldman, Sachs & Co. is the banker on the hospital system’s sale that shifted floating rate debt to a fixed rate. and Kaufman Hall & Associates is the financial adviser.

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Healthcare industry Illinois
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