Moody's Investors Service raised its rating to Baa1 from Baa2 on $137 million of bonds issued on behalf of the Altru Health System by the city of Grand Forks. The outlook is stable.
Altru is the primary referral hospital for a 17-county region and is Grand Forks' only acute-care facility.
Its operating performance and several key fiscal measures have improved over the past two years, according to analysts. The hospital's maximum annual debt-service coverage, for example, was 3.5 times in fiscal 2010 compared to 1.6 times in fiscal 2008, Moody's said.
The upgrade "reflects fundamentally improved operating performance, improved balance-sheet measures, a local economy that is more stable and resilient than the national average, and recent favorable competitive developments," analysts said.
"The stable outlook incorporates the possibility of additional debt in 2012, and the expectation that the hospital will continue to produce strong coverage levels in support of its debt service obligations."
Management is considering issuing $40 million of bonds in 2012 to finance various capital projects, including a new clinic, but will hold off if it fails to reach certain benchmarks, according to Moody's.
Other credit strengths include a formal affiliation with the Mayo Clinic, a strong relationship with its physicians, and improved cash and liquidity. Pressures include a new competitor in the area, a tight labor market, and flat or declining population.