CHICAGO — Moody's Investors Service revised its outlook to positive from stable on Avera Health, one of South Dakota's largest health care providers.
Moody's maintains an A1 rating on Avera's debt, which totals roughly $471 million.
The ratings action reflects an improved 2013 performance backed by 10 years of steady organization growth, improved market share, and a better balance sheet, analysts said.
Avera is coming to market the week of June 16 with $59 million of fixed-rate, new-money revenue bonds.
The system is based in Sioux Falls but enjoys a dominant market share in the eastern part of the state and is South Dakota's single largest private employer, according to Moody's. It has $1.4 billion of annual revenue.
"The positive outlook reflects a gradual but persistent strengthening of the organization, with an improved balance sheet profile overall, superior size, and a dominant market position in the state," Moody's said in the ratings report. "If the organization is able to continue to improve cash flow, digest the additional debt, stabilize margins, and successfully implement its projects, we would expect to upgrade."
Challenges include major competition from other providers, primarily Sanford Health, as well as "somewhat aggressive asset liability management practices," analysts said. For example, 57% of the system's debt has bank exposure; the system has $77 million in interest-rate swaps exposure; and 60% of unrestricted cash and investments is allocated to equities, hedge funds, and other alternatives.
Standard & Poor's upgraded Avera to AA-minus in June 2013.
