NEW YORK - Standard & Poor's Ratings Services said it revised its rating outlook on Louisiana Public Facilities Authority's debt issued for Franciscan Missionaries Of Our Lady Health System Inc. (FMOLHS), to negative from stable. The outlook revision is based on the hospital system's more constrained balance sheet due to the proposed incremental debt, unrealized investment losses, and due to FMOLHS's slightly weaker operating performance for the nine-months, year to date ended March 31.
Standard & Poor's also assigned its A-plus long-term rating to the authority's $150 million series 2009 fixed-rate bonds issued for FMOLHS. FMOLHS is issuing series 2009 bonds to fund construction of a replacement hospital for the Our Lady of Lourdes Regional Medical Center (Lourdes) in Lafayette, La. At the same time, Standard & Poor's affirmed its A-plus long-term ratings, A-plus underlying ratings (SPURs), and AAA/A-1-plus and AAA/A-1 dual ratings on FMOLHS's other rated obligations.
The long-term A-plus ratings reflect FMOLHS's solid overall historical and pro forma balance sheet metrics; positive consolidated income from operations; good overall patient utilization and operating performance for the hospital system; and a capable and experienced management team.
"We revised the outlook to negative based on the consolidated system's more constrained balance metrics, and from the negative effects of recent investment market volatility," said Standard & Poor's Karl Propst. "We expect management to execute its strategy successfully to improve the system's operating margins, and to address specific operating challenges at individual hospitals," said Propst.
Although not expected, we would be concerned if weak operations at any FMOLHS hospital became a material drain on the system. FMOLHS has $790 million of capital spending targeted over the next five years, and may issue incremental debt to fund a portion of those project costs. However, management has the opportunity to control the timing and scope of its spending, and reports that it will not pursue some of the projects under certain circumstances or without adequate outside fundraising.
