LOS ANGELES — Moody's Investors Service affirmed its A1 underlying long-term rating on Queen Health System of Hawaii ahead of its plans to price $403 million in revenue bonds on Jan. 22.
The outlook is stable.
"The Series 2015 financing improves QHS' debt structure, eliminating exposure to auction securities and to certain, lower-rated banks," according to Moody's Analysts Eugene Bradley Spielman and Daniel Steingart.
QHS operates the state's largest single-site tertiary hospital, but analysts said it is located in Honolulu and faces competition from Kaiser Permanente, Kuakini Health System, and the state's public health system.
The $70 million acquisition of Hawaii Medical Center-West in 2012 "consolidates the system's market position and provides a foothold in the attractive western portion of Oahu, but creates challenges in the near term," according to the report.
The bonds will be sold in four tranches including $178.5 million in Series 2015A tax-exempt fixed rate; $119 million Series 2015B and 2015C variable rate tax-exempt revenue bonds, which also received a P-1 short-term rating; and $105 million Series 2015D taxable bonds.
The first three tax-exempt series will be issued by the Hawaii Department of Finance. The taxable bonds will be issued by the health system directly.
Concurrent with the bond sale, QHS will be entering into a $75 million unrated direct loan, according to the Moody's report.
"The affirmation of the A1 revenue bond rating and the maintenance of the stable outlook is based on QHS' maintenance of strong liquidity, and its status as one of the premier medical centers in the state, with a large regional draw, and a very strong reputation," according to Moody's analysts.
