Moody's Investors Service said it has downgraded to Baa2 from Baa1 the issuer rating assigned to Presence Health, Ill., and the ratings of Resurrection Health Care and Provena Health as parity obligations under the Presence Health master indenture.
The rating outlook is stable at the lower rating level on Presence, Provena and Resurrection Health Care (RHC). With the May 9, 2013, consolidation of outstanding indebtedness of the RHC and Provena Obligated Groups, all of the obligations are secured by Presence Health pursuant to an Amended and Restated Master Trust Indenture.
Approximately $579.5 million of debt is affected by these actions (originally issued by RHC and Provena).
The downgrade to Baa2 from Baa1 reflects sizable volume declines for two consecutive years contributing to a sharp decline in operating performance in FY 2013, with operating losses that exceeded management expectations and represented a marked variance from budgeted and revised expectations, in spite of noted improvement in the run rate in the last quarter of FY 2013.
The downgrade also incorporates a change in certain core strategies that is suggested by initiatives that may result in the realignment or divestiture of certain ministry assets as management endeavors to stabilize the System's financial platform.
The Baa2 is supported by Presence Health's sizable market footprint including some geographic diversity, maintenance of adequate unrestricted cash and investments position which is largely liquid.
At the Baa2, the rating remains tempered by high leverage, particularly when including indirect debt obligations and an intensified competitive landscape. The stable rating outlook at the lower level reflects expectations that operating synergies to be realized through multiple comprehensive strategic initiatives, already underway, will thwart further erosion and provide for improved performance in FY 2014.
