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Moody's Cites Sandy, Puts NYU Hospitals Center under Review

Moody’s Investors Service has placed New York University Hospitals Center’s A3 bond rating under review for possible downgrade, after damage from Hurricane Sandy forced the continued closure of Tisch Hospital due to the loss of Consolidated Edison-delivered electricity and steam.

The rating affects $753 million of rated debt.

The center, a component of the NYU Langone Medical Center, is an academic medical teaching hospital in New York. Tisch and the Rusk Institute of Rehabilitation Medicine, both of which face the East River in Manhattan, are its main campuses.

Moody’s, in a statement late Tuesday, said it would concentrate its review on the possible need to accelerate capital projects already started; the deterioration of the center’s financial profile including declines in revenue or liquidity; and the displacement of significant in-patient demand “which could lead to market share shifts, should Tisch remain closed for an extended period.”

Multiple buildings on its main campus sustained heavy damage and virtually all the clinical facilities closed when Sandy hit Oct. 29. According to Moody’s, management reported that as of Nov. 16, facilities that generate 60% of the center’s net revenue have reopened and that Tisch Hospital sustained little damage above grade.

“However, it remains unclear when Tisch will completely reopen as power has not been restored at this time although management anticipates inpatient operations starting in Tisch in phases beginning in December,” Moody’s said.

While insurance coverage, reimbursement from the Federal Emergency Management Agency and philanthropy are expected to cover most of the recovery costs, when the funds will be received is a variable.

As of Monday, according to Moody’s, the center had about $585 million of unrestricted cash and investments, not including receipts from an anticipated captive insurance company dividend of $51 million, which it expected to receive Wednesday. The center also maintains $400 million of bank lines of credit, of which about $260 million remained undrawn as of Monday.

NYU Hospitals Center held a $250 million bond sale in early August to repay an outstanding line of credit, fund working capital, and financing various projects under its campus reformation plan, including the relocation of buildings to make way for the new Helen L. and Martin S. Kimmel Pavilion.

Standard & Poor’s had upgraded the center’s rating earlier this year to A-minus from BBB-plus, citing the center’s strong operating performance. Fitch Ratings had also assigned an A-minus, upgraded from BBB-plus in December.

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