Moody's Investors Service upgraded St. Joseph's Healthcare System (N.J.) to Baa3 from Ba1 on Oct. 17.
The upgrade to investment grade affects $231 million issued by New Jersey Health Care Facilities Finance Authority.
At the new rating, Moody's changed the outlook to stable from positive.
Moody's analyst Jennifer Ewing said operating cash flow margins improved to 13.4% in the first nine months of fiscal year 2014 from 9% in fiscal year 2012. Operating cash flow is defined as operating income plus depreciation and amortization expense and interest expense, Ewing said.
Annualized 2014 results indicate that Moody's adjusted maximum annual debt service should improve to 5.1 from 3.4 times in fiscal year 2013. These same annualized 2014 results indicate the debt-to-cash flow ratio should improve to 2.8 from 5 times in fiscal 2013.
Furthermore, the system's cash on hand improved to 117 days cash on hand as of Sept. 30 from 92 days cash on hand as of Dec. 31, 2013.
Finally, the system's market share of 35% is the biggest among healthcare systems in the four county service area it serves. St. Joseph's is based in Paterson.
As a challenge, Ewing pointed out that the system's cash-to-direct debt level as of Sept. 30 was 83% compared to a Baa3 median of 102%.
"St. Joseph's Healthcare System is pleased with Moody's upgraded bond rating with a 'stable' outlook," said Nancy Collins, director of marketing and public relations for St. Joseph's Healthcare Systems. "This upgrade indicates continued progress reflective of improvements in our organization's financial strength, especially in regard to operating performance and balance sheet measures."