MaineHealth Outlook to Negative by S&P

Standard & Poor's Ratings Services said it revised its outlook to negative from stable and affirmed its A-plus issuer credit rating (ICR) on MaineHealth.

In addition, Standard & Poor's assigned its A-plus rating to Maine Health & Higher Educational Facilities Authority's $84.25 million series 2014 revenue bonds issued for MaineHealth.

"The negative outlook reflects the possibility that we might lower our rating on MaineHealth over the next two years due to its weak operating profitability and modest financial resources, despite what we believe will be a relatively strong enterprise profile during that time," said Standard & Poor's credit analyst Ken Rodgers.

"The negative outlook and ratings reflect our view of MaineHealth's strong enterprise profile, even though its financial profile has been weakening, with depressed financial operating margins at fiscal year-ends Sept. 30, 2013, and 2014 with very modest improvement anticipated for the current year," added Rodgers.

The health system's financial resource ratios are somewhat weak for the rating and are not expected to improve materially over the next two years. Moody's would consider it a negative rating factor if MaineHealth issued more debt without a commensurate increase in its financial resources, although it understands there are no plans to issue additional debt in the next two years.

To maintain the rating, MaineHealth's fiscal 2015 earnings and financial resources need to improve such that they are more in line with median ratios for the rating. A higher rating is probably not likely during this outlook period, but future consideration for a higher rating would likely hinge on returning earnings to historical levels such that maximum annual debt service coverage continues to be very strong, financial resources show greatly improved results, demonstrable benefits can be proven from system integration actions, and a stronger management and governance structure is evident.

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