CHICAGO - Moody's Investors Service upgraded Minneapolis-based Fairview Health Services' rating one notch to A2 ahead of its upcoming $120 million revenue bond sale.
Proceeds will refund debt and generate $35 million of new money.
The July 17 action impacts $853 million of debt. After the upgrade, the rating agency revised the outlook to stable from positive as the system prepares to sell bonds through the city of Minneapolis.
"The upgrade to A2 reflects Fairview's size, demonstrable support and strong relationship with the University of Minnesota, continued improvement in balance sheet metrics, and steady financial performance," Moody's wrote.
The system has recorded three straight years of improved results. The A2 rating also factors in the system's favorable market position in the Twin Cities metro area and its advanced care model "that will assist Fairview in better managing patient populations," Moody's said.
Challenges include Fairview's search for a permanent chief executive officer after the unexpected departure of the prior CEO as well as the competitive Twin Cities healthcare market.
"The stable outlook reflects our expectation that balance sheet measures will be maintained and future performance will remain consistent with 2014 results," Moody's added.
Fairview Health Services owns and operates UMMC, the adult and pediatric teaching hospital of the University of Minnesota Medical School, five community-based general acute care hospitals, over 40 primary clinics, over 55 specialty clinics, retail and specialty pharmacies and managed senior care facilities and long term care housing facilities through Ebenezer Society. It also has a 25% ownership share in 130-bed community hospital Maple Grove Hospital in Maple Grove, Minnesota.
Its bonds are secured by an unrestricted receivables pledge from the system's obligated group whose members account for approximately 92% of total system revenue.
Standard & Poor's in May raised its long-term and underlying ratings on Fairview to A-plus from A.