Moody's Investors Service said it has upgraded the senior revenue bond ratings on Poudre Valley Health Care, Colo.'s debt to A1 from A2 reflecting PVHC's participation in the formation of University of Colorado Health, and the inclusion of University of Colorado Hospital Authority in PVHC's obligated group.
(PVHC has also joined UCHA'sobligated group, and the debt secured by UCHA's obligated group has also been upgraded to A1) . Poudre Valley Health Care's Series 2005E debt (which is subordinate to the senior debt and is to be refunded shortly) has been upgraded to A2 from A3. The outlook is stable.
The assignment of the A1 rating and the upgrading of parity debt reflects the formation of a new operating and security structure which represents a new expanded operating entity.
UCHA and PVHC have merged to form University of Colorado Health (UCH).
UCH in turn is entering into a long-term lease with the city of Colorado Springs to operate Memorial Hospital (currently rated A3 with a negative outlook). The three hospitals together have a combined proforma revenue base of over $2.2 billion, and produce over 70,000 admissions.
Proforma combined operating cashflow margin for 2012 was over 15% and the operating margin was over 7%, very strong metrics compared to national medians. Main challenges of the organization include high leverage with proforma cash to debt of 82.9%, debt to revenue of 66.5%, and MADS coverage of 5.2 times. Other challenges include a major project nearing completing at UCHA, the need for a future tower at PVHC, and a recent history of poor operating performance and declining utilization measures at Memorial Hospital.
