DALLAS --After turning around its operating performance, the Kalamazoo, Mich.-based Bronson Healthcare Group’s outlook was bumped to stable as it prepares to refund $109 million of debt.

Moody’s Investors Service affirmed the hospital’s A2 rating while shifting the outlook from negative.

“The stable rating outlook reflects our expectation that Bronson will continue to generate favorable operating margins with its expanding market position, leading to growth in liquidity with the expectation of no significant debt plans,” Moody’s said.

The bond refunding will price through the city of Kalamazoo as conduit issuer on Oct. 4th. The fixed-rate tax-exempt bonds will mature in 2041. Ziegler is lead manager. Miller Canfield Paddock and Stone PLC is bond counsel.

Bond proceeds will refund debt from 2006, 2010, and 2011.

The Bronson system includes three hospitals as well as other facilities and services with an annual operating revenue of about $1 billion.

Bronson has overcome previous operating challenges primarily brought on by the acquisition and integration of the 218-bed Battle Creek Hospital and the system-wide implementation of a new electronic health record system two years ago. At the time Moody’s shifted its credit outlook on Bronson to negative.

The rating agency said its recent credit report that Bronson has improved its operating cash flow margins to 12.4% in fiscal 2015 and 10.7% through six months of fiscal 2016 following an average of 6% in fiscal 2014 and fiscal 2013. Operating margins also improved to 5.9% in fiscal 2015 and 4.2% through six months of fiscal 2016 after experiencing declines in 2012 and 2013.

An expected acquisition of the South Haven Health System will potentially add $40 million in annual operating revenues for Bronson in fiscal 2017 and will extend the group’s market reach in Van Buren County, Michigan.

“As currently proposed, the pending acquisition is expected to occur as a cashless merger with a capital commitment of approximately $18 million over the next 5 years,” according to Moody’s.

The merger with Bronson requires a public vote in addition to standard regulatory approval. The question is expected to go on the ballot locally this November or in 2017.


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