Moody's Investors Service said it has upgraded Alexian Brothers Health System, Ill.'s (ABHS) long-term and underlying bond ratings to A2 from A3.
This action affects approximately $162 million of ABHS rated debt issued through the Illinois Finance Authority. The rating outlook is stable at the higher rating level.
The upgrade to A2 from A3 reflects ABHS's improved operating margins in FY 2011 and ABHS's recent acquisition by Aa1-rated Ascension Health Alliance.
While Ascension is not guaranteeing ABHS's debt, ABHS will benefit financially from integrating certain support services, such as purchasing, investment management, and insurance savings.
The stable outlook at the higher rating level reflects that ABHS will maintain improved operating margins and begin to realize the benefits of being owned by a larger health system.
Given the recent relationship with Ascension, Moody's expects to continue to evaluate the effect of the integration on ABHS's credit position as it evolves over the next several years.
The A2 rating also incorporates ABHS's challenges including operating in a competitive service area and relatively high capital spending projections that may weaken an already modest balance sheet.