Standard & Poor’s this week revised its outlook on the HealthEast Care System to positive from stable, moving it closer to getting its investment-grade rating restored.

The system has low investment-grade ratings from the other rating agencies.

Standard & Poor’s currently gives a BB-plus to the system’s $302 million of outstanding debt sold through the St. Paul Housing and Redevelopment Authority and the Washington County Housing and Redevelopment Authority.

Analysts changed the outlook in recognition of HealthEast’s ability to continue to outperform its budgets on a yearly basis while investing in its facilities.

“The positive outlook on HealthEast’s debt reflects our expectation that as management continues to invest in its campuses and other quality initiatives, it will not allow the system to veer from the 2008 budget,” wrote analyst Brian Williamson.

The system, which maintains a leading 39.6% market share in the Minneapolis and St. Paul region, operates three acute-care hospitals and other facilities. It generated operating revenue of $726.5 million in fiscal 2007. Challenges include a high rate of leverage, the need for additional capital spending, and a low cash-to-debt ratio.

Standard & Poor’s action follows Fitch Ratings decision late last year to upgrade the credit to BBB-minus with a stable outlook. Moody’s Investors Service rates HealthEast Baa3 with a negative outlook.

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