Standard & Poor's Ratings Services said it raised its rating and underlying rating to BBB-plus from BBB on the California Statewide Communities Development Authority's series 2005A and 2005B health care revenue bonds, issued for Redlands Community Hospital.
The outlook is stable.
At the same time, the agency raised its rating to AAA/A-1 from AA-plus/A-1 on the authority's series 2005B variable-rate revenue bonds based on the application of Standard & Poor's joint criteria assuming low correlation.
The AAA long-term component of the rating is based jointly on our view of a letter of credit provided by JPMorgan Chase Bank NA (A-plus/A-1) and the BBB-plus SPUR on RCH. The A-1 short-term component of the rating is based solely on the rating of the LOC provider. The LOC expires in May 2013. Management is in the process of refinancing the 2005B bonds through a direct placement with a bank.
"The upgrade of the rating and SPUR to BBB-plus reflects our assessment of RCH's financial profile, which has grown to a level consistent with rating medians," said Standard & Poor's credit analyst Kenneth Gacka.
Specifically, earnings have been strong for the past two audited years, leverage is moderate, and unrestricted cash has strengthened in terms of days' cash on hand and relative to outstanding debt.
RCH is well positioned to maintain the strength of its financial profile due to its good business position and because management reports that there are no planned projects that would require additional debt or draws on reserves.
The rating action also reflects the resolution of RCH's legal settlement from a class action wage and hour lawsuit at an amount less than previously anticipated, which aided in the maintenance of good unrestricted cash even after factoring in the impact of the settlement.
At Sept. 30, 2012, RCH had $55.5 million of long-term debt outstanding.
