Standard & Poor's Ratings Services said it raised its long-term rating and underlying rating to BBB-plus from BBB on bonds issued by the New Jersey Health Care Facilities Financing Authority for Saint Barnabas Corp., doing business as Barnabas Health.
At the same time, Standard & Poor's assigned its BBB-plus rating to $178 million fixed-rate series 2012A bonds and affirmed its AA-plus/A-1 rating on other bonds issued by the authority for the corporation.
The stable outlook reflects Standard & Poor's view of Barnabas Health's continued strengthening financial profile, which provides some operating cushion, even at this higher rating level.
"Although Barnabas Health's enterprise profile is more indicative of an A category rating, the system needs to generate a longer record of improved financial results to justify a positive outlook or A category rating," said Standard & Poor's credit analyst Cynthia Keller. "Furthermore, some liquidity ratios remain light for a BBB-plus rated system," said Keller.
Barnabas Health's financial profile has historically lagged its stronger enterprise profile until the past three years when earnings, cash flow, and debt service coverage have dramatically increased. The balance sheet, while still somewhat below median levels for some ratios, has also strengthened materially, according to Standard & Poor's. This financial improvement, coupled with a continued solid enterprise profile, has resulted in a full category rating improvement since 2009, including the rating action taken here.
Barnabas Health's still relatively limited cash and investments, especially when compared with its capital and pension funding needs and uncertainty surrounding potential mergers or acquisitions, which could be dilutive to the organization, preclude a higher rating at this time. In addition, although diminishing, Barnabas Health remains reliant on New Jersey subsidy funds and disproportionate share revenue for operating profitability.
A lower rating could be possible should Barnabas Health report reduced earnings or include new system members that prove materially dilutive to Barnabas Health's financial profile, especially its balance sheet metrics.
