Standard & Poor’s has revised AA-plus rated Northwestern Memorial Hospital’s outlook to negative from stable due to a weakened balance sheet ahead of this week’s sale of $455 million of fixed-rate bonds through the Illinois Finance Authority.

“The negative outlook reflects NMH’s weakened balance sheet following some strain in financial operating performance in 2008 expected from the opening of the new Prentice Women’s Hospital, and recent unfavorable investment performance that has affected many organizations in the current recession,” analyst Brian Williamson said. “These factors also have led to lower pro forma maximum annual debt service coverage than historical norms when including an impairment loss.”

Proceeds of the sale refund debt sold in 1995, 2004, 2007, and 2008. About $45 million of new money will be raised and proceeds will also cover swap termination costs of about $20 million. The outlook change impacts a total of $807 million of debt.

The hospital’s rating reflects its historically very strong financial performance despite weakened results in fiscal 2008, low debt leverage, outstanding management, an excellent medical staff, strong volume trends, and a very favorable payer mix not too dependent on governmental payers. The credit also benefits from strong philanthropic support and growing market share. NMH has adequate liquidity for the rating level, analyts said.

JPMorgan is senior manager and Citi is co-senior. Kaufman Hall & Associates Inc. is financial adviser and Jones Day is bond counsel.

Northwestern, located in Chicago, carries ratings in the double-A category from all three rating agencies.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.