NEW YORK - Standard & Poor's Ratings Services said it revised its rating outlook on Massachusetts Health and Educational Facilities Authority's debt issued for Lowell General Hospital (LGH) to stable from negative.
At the same time, Standard & Poor's assigned its BBB-plus long-term rating to the authority's $61 million series 2010C fixed-rate revenue bonds issued for LGH and affirmed its BBB-plus long-term rating on the $16.3 million series 1996B bonds.
The BBB-plus rating reflects Standard & Poor's assessment of LGH's slim, but rising, earnings and cash flow; improving market position in Lowell, Mass. and the greater service area as demonstrated by growing volumes and market share; and anticipated benefits from a construction project that will add capacity and modern amenities. An added credit factor is LGH's balance sheet that Standard & Poor's believes is adequate for the rating but will be stretched by the debt issuance.
"The stable outlook reflects our view of LGH's recently positive volume and earnings momentum," said Standard & Poor's credit analyst Cynthia Keller Macdonald. "Although we consider the balance sheet weak for a BBB-plus credit, we believe the project will improve LGH's ability to attract patients by providing a more modern physical facility, which, in turn, should translate into higher revenue and earnings," said Keller Macdonald.
A lower rating is possible with any material negative variation in volume or financial expectations, especially debt service coverage and cash and investment balances. A higher rating is unlikely during the one- to two-year period covered by the outlook period as there is ample project construction and fill up risk and because it will take time to rebuild the balance sheet.
It is Standard & Poor's understanding that the series 2010 bonds will refund the series 1996 bonds. This rating also incorporates the expected issuance later this year of the $54 million series 2010D variable-rate demand bonds backed by a letter of credit (LOC) from JP Morgan Chase.
Securing the bonds is a revenue and mortgage pledge from the 217-bed, general acute-care Lowell General Hospital.
