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University of Wisconsin Hospitals Upgraded to Aa3 by Moody's

Moody's Investors Service said it assigned a Aa3 rating to University of Wisconsin Hospitals and Clinics Authority's $262.675 million of Series 2013A fixed rate bonds to be issued by UWHCA and upgraded the rating on UWHCA's outstanding rated debt to Aa3 from A1.

The rating outlook is stable at the higher rating level.

UWHCA will have approximately $295.16 million of pro-forma rated debt including the current borrowing.

The upgrade to Aa3 from A1 and assignment of the Aa3 rating reflects UWHCA's renowned clinical reputation and unique role as Wisconsin's only academic medical center supporting strong demand and a growing market position, consistent trend of strengthening financial performance that has translated into a strong and growing investment portfolio, and still moderate pro-forma debt levels and exceptional debt measures (including the current borrowing).

UWHCA's challenges include a potential shift in the competitive landscape with the recent changes to the PPIC insurance contract which may temper volumes, a new Academic Advancement Agreement (AAA) with University of Wisconsin's School of Medicine and Public Health (UWSMPH) that may temper further financial strengthening as incremental funding can require the transfer of profitability above certain financial target levels at UWHCA annually (presently 5% operating margin and 180 days cash, but subject to annual increase at the ultimate discretion of the UWHCA Board) and an expected increase in capital spending over the next 5 years.

The rating outlook is stable at the higher rating level reflecting our belief that UWHCA will maintain strong margins and liquidity, responding to competitive challenges and maintaining market share while absorbing the increased funding under the new AAA with UWSMPH.

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