Illinois' OSF Healthcare Maintains S&P's A-Rating for Upcoming Issue

CHICAGO - Standard & Poor's affirmed OSF Healthcare System's single-A rating and its stable outlook last week in anticipation of the Peoria, Ill.-based system's planned sales of two bond issues totaling $110 million later this month.

The agency said that OSF's strong flagship hospital, improving finances, moderate debt burden, and broad range of facilities and services combined to garner it the rating.

Moody's Investors Service rated the system A2 with a negative outlook earlier in the month. Moody's agreed that OSF's bottom line has shown improvement, but added that OSF would have to prove it could maintain those improvements before the agency would remove the negative outlook.

OSF suffered a $28.7 million operating loss in fiscal 1998, but it cut its deficit to an estimated $3.4 million in the first three-quarters of 1999. Counting investment income, the system made $11.8 million in net income during the first nine months of the year.

Like many health care credits, OSF has suffered losses at its managed care plan and its physician practices. But it has predicted significant improvements in both areas this year, according to the Standard and Poor's report. The agency said, "OSF's financial performance will improve as management works to reduce losses attributable to employed physicians and OSF Health Plans."

Earlier this month, Fitch IBCA Inc. rated the system A, citing its "solid debt service coverage," a "solid position" in its key markets, and an "excellent management team."

OSF, a Catholic non-profit health system, will sell the fixed-rate debt in two issues to benefit facilities in two states. It will borrow $17 million through the Michigan State Hospital Finance Authority and $94 million through the Illinois Health Facilities Authority.