DALLAS -- Plans to transform Cuyahoga County, Ohio-based MetroHealth System's current campus could take a toll on its rating if the price tag runs too big, said S&P Global Ratings.
The rating agency Wednesday placed the A-minus rating on the system's series 2009 bonds on Credit Watch with negative implications in anticipation of the "potential for additional debt" related to the campus transformation plan.
"We could lower the rating in case of a sizable debt issuance related to the larger capital plan or if we come to believe that capital spending could pressure overall balance sheet metrics, depending on timing of spending relative to cash flow," said S&P. "In addition, failure to improve operating and balance sheet metrics from 2016 levels, per our calculations, could also have an impact on the rating."
If downgraded, S&P said the rating would remain in the BBB category.
The 2009B bonds, which were issued by the county on behalf of MetroHealth , were sold under the federal stimulus package's Build America Bond program.
According to MetroHealth's website, the total project cost of its campus transformation is estimated at around $855 million over five or six years. About $90 million has been spent.
The Cleveland-based county health system said last December that by the end of the first quarter of 2017 it plans to borrow up to $1.25 billion to finance the $855 million transformation of the 52-acre campus and to refund some outstanding debt.
The hospital had no comment on the impact a potential downgrade might have on its planned bond issuance.
In November, the system's Board of Trustees approved the pursuit of a financing plan to issue bonds to fund the project that may include the refinancing of some outstanding debt and swaps.
The actual issuance of bonds would require additional board action and a resolution that is based on specific terms and conditions.
The system has 24 community health centers, four emergency departments, four clinics in Discount Drug Mart stores, five MetroExpressCare locations and nine pharmacies.
MetroHealth System has $93 million of outstanding bonds that are rated A3 by Moody's Investors Service with a stable outlook. Fitch Ratings rates the health system A-minus, with stable outlook.
S&P also affirmed its A-minus rating on Wednesday and said the rating reflects the "steady financial trend through an ongoing transformational program, which includes solid commercial rate increases, revenue cycle management and cost control."
