Fitch Ratings and Moody’s Investors Service recently revised their outlooks on Methodist Medical Center of Illinois’ rating to positive from stable in recognition of its improved operating performance.

The action affects $52 million of variable-rate bonds issued through the Illinois Finance Authority. The bonds are secured by a pledge of unrestricted receivables of the obligated group.

Fitch Ratings assigns an A rating to the hospital. “The positive outlook is supported by Methodist’s strong balance sheet metrics and improved cash flow generation in fiscal 2012, which has led to very strong debt service coverage,” Fitch wrote.

Moody’s Investors Service rates Methodist A2. “The revision of the rating outlook to positive from stable reflects our belief that MMCI’s financial profile will strengthen and balance sheet indicators will continue to grow with support from its new parent corporation for capital expenditures and other operating infrastructure,” the agency wrote.

The hospital’s credit benefits from a  partnership established in 2011 with Iowa Health System. Iowa Health, which recently changed corporate name to UnityPoint Health and is rated AA-minus, has pledged to provide Methodist with $175 million for capital projects. Methodist plans to join Iowa Health’s obligated group when Iowa Health issues debt.

The hospital’s challenges include competition from three nearby hospitals and a reliance on one employer, Caterpillar, although its market share has been relatively stable since 2005, Fitch wrote. Methodist had intended to build a replacement facility for its 329-bed medical center located in Peoria, but has scaled back its plans to renovateand expand its main campus and outpatient diagnostic center. The hospital has revenues of $362 million in fiscal 2012.

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