Moody’s Investors Service this week revised its outlook on CentraCare Health System’s underlying A3 rating to stable from negative ahead of its $50 million bond sale next month.

The revision affects $413 million of debt. The system, with $700 million of operating revenue, issues its debt through the city of St. Cloud.

CentraCare next month will refund $50 million of debt. The variable-rate bonds will be supported by a letter of credit from Scotia Bank. The system will also reoffer another $150 million that will carry insurance from Assured Guaranty Corp. An $80 million series will be remarketed as fixed-rate bonds, while $20 million will carry a standby bond purchase agreement from USBank NA and a $50 million series will carry an SBPA from JPMorgan.

Moody’s attributed the outlook revision to improvement in the debt structure as a result of the upcoming financing that reduces the amount of variable rate-puttable debt outstanding and diversifies the bank exposure and renewal risk.

CentraCare also benefited from a very strong operating year with profits exceeding historical levels. It holds a dominant market position in the 12-county rural region between Duluth, Minn., and Fargo, N.D. It’s the only non-critical access hospital in its service area.

Its challenges include deterioration in balance sheet measures over the last 12 months due to significant collateral posting and investment losses from a portfolio weighted heavily toward equities.

The system is made up of 231 employed physicians, a foundation, two small rural hospitals, a large ambulatory care center, two nursing homes, and an assisted living facility.

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