S&P Global Ratings said it lowered its long-term and underlying ratings on debt issued for and by Catholic Health Initiatives (CHI), Englewood, Colo., to BBB-plus from A-minus and removed the ratings from CreditWatch with negative implications. The outlook is stable.
S&P said it also lowered its short-term ratings on CHI, to A-2 from A-1; this includes the commercial paper rating and the short-term component of dual ratings backed by CHI's self-liquidity. The downgrade to A-2 reflects the lower long-term rating on CHI.
S&P also lowered its long-term rating on Brazos County Health Facilities Development Corp., Texas' debt originally issued for Sylvania Franciscan Health's obligated group (SFH) to BBB-plus from A-minus. In 2015, CHI absorbed SFH's outstanding debt and secured it through CHI's capital obligation document (COD) and as a result the debt originally rated based on SFH is now rated based on CHI.
At the same time, S&P lowered its long-term rating and SPUR on Colorado Health Facilities Authority's series 2006A hospital revenue bonds, issued for Longmont United Hospital (Longmont) to BBB from BBB-plus. The outlook is stable.
The rating action reflects the application of S&P's group rating methodology and Longmont's relationship to CHI. Longmont is a strategically important subsidiary of CHI, so the rating may be assessed as many as three notches higher than its stand-alone credit profile of bb, S&P said.
Management has requested the rating agency withdraw this rating as all rated publically held debt has been refunded. S&P said it will withdraw this rating within a few days after the release of this report.
S&P Global Ratings also lowered its long-term rating on Louisville & Jefferson County Metro Government, Ky.'s series 2012 bonds issued for Louisville Medical Center Laundry to BBB-plus from A-minus. The outlook is stable.
The bonds are supported by a pool of revenue streams from user institutions that use a share of the laundry services provided by Louisville Medical Center (LMC; the general manager). The rating action reflects the credit quality of the lowest-rated institution in the pool, which is CHI.
S&P also lowered its long-term rating on the LMC water and steam plant series 2012A and series 2016 bonds issued by Louisville & Jefferson County Metro Government to BBB-plus from A-minus. The outlook is stable.
The bonds are supported by a user contract for the steam and water plant between LMC (the general manager) and five primary users. The rating action reflects the credit quality of the lowest-rated institution in the pool, which is CHI.
"The downgrade on CHI reflects a broad financial profile that is no longer consistent with the prior A-minus rating, and while management's current turnaround plan has created an expectation for stabilization and modest improvement over the next 18 months, it is our opinion that it will take several years on the current financial improvement trajectory for CHI to return to a higher rating," said S&P credit analyst Martin Arrick.
Recent quarterly performance suggests modest, but meaningful improvement over the prior quarters, S&P said. However, key financial ratios remain well below A-minus medians in all aspects. CHI's size, scale and revenue diversity remain exceptionally strong and help support the rating at the high end of the BBB category and the stable outlook as well.
In particular, CHI's numerous acquisition and divestitures have both narrowed the number of markets CHI operates in, while deepening its presence in those markets, according to the rating agency.
