Moody’s Investors Service affirmed Hazelden Foundation’s A3 rating ahead of its upcoming $20 million sale of fixed-rate debt to finance various projects that will raise the prominent Minnesota-based treatment center’s debt load by 70%.
The foundation will have $32.9 million of rated debt after the sale. Its outstanding debt is in variable-rate mode supported by letters of credit from US Bank, which is rated Aa2. Center City is serving as the conduit issuer. Moody’s assigns a stable outlook to Hazelden’s rating.
The rating reflects Hazelden’s unique market position as a substance-abuse treatment provider with facilities in geographically diverse areas, recent track record of good operating results with favorable operating margins, and a very strong liquidity position, Moody’s wrote.
The system had cash on hand to cover 331 operating days as of August and will maintain a debt-service coverage ratio of 7.3 times after the new issuance.
Hazelden has facilities in Minnesota, Oregon, Illinois, New York and Florida, with its flagship facility located in Center City. The system’s challenges include managing an increased debt load and construction risks.