CHICAGO — Moody's Investors Service on Wednesday assigned an issuer credit rating of Baa1 to Presence Health, the new health care system created by the merger late last year of Resurrection Health Care and Provena Health.
The agency also assigned a stable outlook to the credit. The two completed their merger in November, 2011. Both were rated Baa1 by Moody's at the time.
The rating reflects the system's "sizable market footprint including some geographic diversity, notable improvement in financial performance generated by the consolidated legacy credit groups…as well as maintenance of healthy unrestricted cash and investments position which is highly liquid," Moody's said.
The system enjoys liquidity that covers 165 days of operations and saw an improvement in operating margins in fiscal 2012. It also benefits from an experienced team. The two separate systems plan to consolidate their master trust indentures.
Presence Health's challenges include risks associated with merging two large hospital networks to achieve anticipated savings, pressures on patient volumes from flat to declining levels, its operation in an increasingly competitive market, and a high debt load of $1.2 billion.
"While we believe that Presence faces operating challenges, including stabilizing volume declines and sustaining current operating margins, the stable rating outlook reflects early indications of a successful turnaround and the benefits expected to be achieved from the merger," Moody's said.
Combined, the system has annual revenues of nearly $3 billion and operates 12 hospitals as well as 28 long-term care facilities, 50 specialty clinics, and six home health agencies.
Provena, which was based in suburban Chicago, had $637 million of outstanding bonds and operating revenues of $1.29 billion at the end of fiscal 2009. Resurrection, which was based in Chicago, had $580 million of bonds and operating revenue of $1.42 billion at the end of fiscal 2010.
