Standard & Poor's Ratings Services said it raised to A-plus from A its existing long-term rating and underlying rating on debt issued by the New Jersey Health Care Facilities Financing Authority for AHS Hospital Corp., whose parent company is Atlantic Health System.
Standard & Poor's also assigned its A-plus long-term rating to AHS Hospital Corp.'s $163.645 million series 2013 taxable bonds. The outlook is stable.
In addition, Standard & Poor's affirmed its AAA/A-1 dual ratings on the series 2008B and 2008C bonds, based on the application of low-correlation joint criteria whereby the long-term rating is based jointly on the A-plus SPUR on AHS and the ratings on the letter of credit (LOC) bank, and the short-term component is based on the bank. The LOC banks are Bank of America N.A. for the series 2008B bonds, and JPMorgan Chase Bank N.A. for the series 2008C. Both LOCs expire in May 2016.
"The rating assignment and upgrade reflect continued solid operating performance and overall cash flow and maximum annual debt service (MADS) coverage despite additional debt and a sharp rise in MADS with this issue," said Standard & Poor's credit analyst Martin Arrick, "as well as improvement in unrestricted cash and investments, and our view of Atlantic's improved enterprise profile, which includes the successful acquisition of Newton Medical Center in 2011." These strengths are augmented by growing volumes, increased surgeries and a rising case mix index.
"In our view, AHS is managing an evolving competitive position well," added Arrick, "and expects to improve its already sound market position with the pending acquisition of Chilton Memorial Hospital, although this still needs final regulatory approval, combined with other system building affiliations or acquisitions, which management believes are likely." Risks to the rating include broad industry pressures on price and volume, and the growing rise in population-based payment models, although AHS appears reasonably well positioned with its participation in the Atlantic Accountable Care Organization.
