Standard & Poor’s on Monday revised its rating outlook to negative from stable and affirmed its BBB-plus rating on $5.7 million of Series 2002B bonds issued on behalf of Martin Memorial Medical Center.
The bonds were issued by the Martin County Health Facilities Authority.
“The outlook revision reflects our opinion that the significant increase in both capital spending and additional debt within the next 12 to 18 months will pressure the current rating,” analyst Charlene Butterfield said.
Martin Memorial plans to issue between $100 million and $150 million of debt in first half of 2012 to build a new 82-bed hospital at the Tradition Center for Innovation, a scientific research park in St. Lucie County.
Butterfield said the hospital’s solid business position is expected to allow for continued volume and revenue gains, as well as greater cash flow and balance- sheet growth over the next year or two.
However, she said, “The large debt issuance could create a financial profile that is indicative of a lower rating.”
The rating reflects an improving overall financial profile, coupled with a healthy business position within the primary service area as well as strong demographic trends and a dominant market position, according to Butterfield.
Partly offsetting credit factors include a moderately high debt burden in the seven months of fiscal 2011 through April 30 and plans for additional debt and capital spending that are likely to exert “considerable pressure” on balance sheet and coverage metrics in line with the current rating, the analyst said.
“A weaker balance sheet or debt-service coverage metrics at the time of the future debt issuance could lead to a lower rating during the next year,” she said.
Martin Memorial Medical Center operates Martin Memorial, a 244-bed acute-care facility in Stuart, and Martin Memorial South, a 100-bed acute-care facility in Port Salerno. The primary service area for the hospitals includes Martin County and southern St. Lucie County, which includes the city of Port St. Lucie.