CHICAGO – Illinois-based Edward-Elmhurst Healthcare received an A rating from Fitch Ratings as it prepares to refund old debt issued by the two systems that joined forces in 2013 and establish a new obligated group.

The new Fitch rating applies to $189.4 million being issued through the Illinois Finance Authority. The system is also privately placing about $93 million of bonds as part of the transaction. Fitch was not asked to rate the private placements.

Bank of America Merrill Lynch is the lead underwriter on the public offering and BAML and JPMorgan are directly purchasing the other bonds.

The deal advance refunds debt originally issued by Elmhurst Memorial Healthcare and Edward Hospital and Health System before the two systems joined forces in 2013.

The review had mixed results on the debt of the prior systems. Fitch upgraded to A from BBB the Elmhurst Memorial Healthcare's $280 million of rated debt from 2008 and 2013 sales. Fitch also downgraded to A from A-plus the underlying rating on Edward Hospital's $235 of debt from issues in 2008 and 2009.

The establishment of the obligated group marks one of the final steps in Edward and Elmhurst's merger. "After the issuance of the series 2016 bonds, the separate Edward and Elmhurst obligated groups will cease to exist," Fitch said.

Bond payments are secured by a joint and several revenue pledge of the Edward-Elmhurst Healthcare obligated group, which will be created upon the issuance of the series 2016 financing, Fitch said. The bonds are not to be supported by a mortgage or a debt service reserve fund.

EEH benefits from volume growth in its favorable western Chicago suburban service area but while profitable its margins are modest for the A level and "EEH's pro forma debt service ratios are somewhat stressed," Fitch said. The system generated about $1.2 billion in operating revenue in fiscal 2016.


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