The Wisconsin Health and Educational Facilities Authority on Monday signed off on Aurora Health Care’s sale of $160 million of new-money and current refunding bonds set for this week.
Fitch Ratings earlier this month affirmed Aurora’s A rating on $1.15 billion of debt sold through WHEFA. Moody’s Investors Service affirmed its A3 rating. Aurora is the state’s largest health care system, with 12 hospitals, 2,900 beds, and 1,200 physicians that serve 95 communities throughout eastern Wisconsin.
Merrill Lynch & Co. is the underwriter. The transaction includes a mix of fixed-rate bonds and securities with a five- and seven-year term, a product Merrill labels “term-rate mode” bonds.
Proceeds will refund debt issued in 1997 and raise new money to reimburse Aurora for some of the construction costs of two hospitals being built in Grafton and Summit. The two have a total price tag of $371 million and are expected to strengthen the system’s market position.
Fitch said the rating reflects Aurora’s low operating-risk profile resulting from its large, integrated delivery system model; stable and consistent operating profitability; and excellent management practices. The system is nearing completion of its 17-year-old expansion strategy.
Aurora has maintained stable debt service coverage ratios over the last three fiscal years of between 2.7 and three times, with operating revenues of $3.58 billion in fiscal 2008.
“Aurora’s steady financial performance reflects the system’s excellent management practices, which have resulted in a successful execution of Aurora’s long-term strategic plan, while maintaining solid financial performance,” analysts wrote.
Credit concerns include light liquidity levels for an A-rated credit, with cash and investments of $759 million providing 78.9 days’ cash on hand, future capital plans that call for additional debt in 2010 and 2011, and the impact of the recession on its balance sheet.
