Fitch Ratings said it has upgraded to A from A-minus the ratings on approximately $558.4 million of outstanding revenue bonds issued by the Illinois Finance Authority on behalf of Rush University Medical Center Obligated Group.
The bonds upgraded are Series 2009D, Series 2009C, Series 2009B revenue bonds, Series 2009A, Series 2008A (variable rate), and Series 2006B.
The rating outlook is revised to stable from positive.
Debt payments are secured by a pledge of the gross revenues of the obligated group and a mortgage on certain property of the obligated group.
Rush's operating and operating EBITDA margins have exceeded Fitch's A category medians in each of the last four fiscal years.
With the successful completion and opening of Rush's new patient tower and clinical care platform in January 2012, the associated project development risk has been eliminated.
Although it operates in the highly competitive Chicago metropolitan market, Rush benefits from its excellent clinical quality and reputation, highly aligned medical staff and health sciences programs in medicine, nursing and research.
Rush's moderate leverage position and strong profitability has resulted in solid and improving coverage of maximum annual debt service (MADS) by operating EBITDA of 3.6x and 3.9x in fiscal 2010 and 2011, respectively, which exceeds the 2011 'A'-rated median of 3.3x.
At March 31, 2012, Rush liquidity indicators of 135.4 days cash on hand, a 10.4x cushion ratio and 88.3% cash to long-term debt are weak relative to Fitch's respective 'A' category medians of 194.1, 15.4x and 113.6%. However, future capital spending is modest, which should allow for an improvement in liquidity indicators going forward.
The upgrade is based primarily on Rush's consistently strong operating profitability combined with the successful completion and opening of its new patient and clinical care tower on the Rush University Medical Center campus.
The completion of the "campus transformation" project significantly reduces the development and financial risk assumed by the corporation and should allow for growth in balance sheet liquidity due to lower future capital spending requirements.
Rush opened its new patient tower and clinical platform on Jan. 9, on time and within budget.
The new facility totals 830,000 square feet and is licensed for 304 new private adult and critical care beds. Fitch believes the new facility should improve patient volumes, outcomes and satisfaction while providing strategic benefits to the organization in maintaining its outstanding clinical quality and reputation in the competitive Chicago-area marketplace.
The total cost of the project is estimated at $1.1 billion of which $950 million has been spent to date.