Standard & Poor's Ratings Services said it raised its long-term rating and underlying rating to AA-minus from A-plus, and its dual ratings to AA-minus/A-1-plus from A-plus/A-1, where applicable, on North Central Texas Health Facility Development Corp., Texas' bonds issued for BaylorScott & White Health (BSWH).
The outlook, where applicable, is stable.
At the same time, Standard & Poor's assigned its AA-minus long-term rating to Baylor Scott & White Holdings' $554.28 million series 2015 taxable bonds, issued for BSWH.
"The rating action reflects our view of the BSWH merger last year, which we believe created significant opportunities for cost synergies based on increased size and scale and clearly augments the organization's ability to respond to future changes and challenges in the health care sector," said Standard & Poor's credit analyst Kevin Holloran.
The AA-minus rating further reflects BSWH's: Significant geographic spread throughout central and north Texas, with strong market shares in its various markets with 43 hospitals, 500 patient care access sites, and more than 1,600 employed (6,000 affiliated) physicians; good operational liquidity, with estimated aggregate unrestricted reserves at almost $3.2 billion as of fiscal 2015 year to date, equal to approximately 184 days' cash on hand; and solid financial operations, with a year to date operating margin of 8.9%, which is equal to 7.3x pro-forma maximum annual debt service (MADS) coverage.
Bond proceeds of approximately $735 million (there will also be an unrated 2015A series as a tax-exempt direct placement with TD Bank for $180.75 million, which will be consistent with BSWH's existing bank agreements) will be used predominantly for refunding of various legacy Scott & White and Baylor Health Care System debt, and will also provide approximately $250 million of new money to be used for various capital projects and strategic initiatives.
The outlook reflects the anticipation of continued positive operating results given BSWH's strong and expanding business position in the growing central and north Texas service areas.
