Standard & Poor's Ratings Services said it revised its outlook to negative from stable and affirmed its AA-minus issuer credit rating on Missouri-based Mercy Health (Mercy, formerly known as Sisters of Mercy Health System) and its AA-minus long-term rating and underlying rating (SPUR) on various issuers' revenue bonds issued for Mercy.
In addition, Standard & Poor's assigned its AA-minus long-term rating to the Missouri Health and Educational Facilities Authority's $360 million series 2014F fixed-rate revenue bonds issued for Mercy. The outlook is negative.
"The outlook revision reflects our view of Mercy's operating losses in fiscal 2014, following a recent history of light operations, coupled with the opening of the new Joplin facility," said Standard & Poor's credit analyst Suzie Desai. "Although the new facility is a business positive, it could create additional pressure at a time when operations are weaker than what is typical for an AA-minus rated credit," Desai added.
The AA-minus rating reflects Mercy's historically low debt levels and robust maximum annual debt service coverage, improving unrestricted reserves, and strengthening business positions in key markets.
Approximately $250 million of the $360 million series 2014F bond proceeds will go toward reimbursement for prior capital expenditures, and the remainder, along with a premium, will go toward future capital spending.
