New Jersey’s Atlantic Health System was upgraded by Moody’s Investors Service ahead of a $250 million bond sale.

Moody’s boosted Atlantic Health one notch from A1 to Aa3 late Monday citing the hospital system's healthy financial positioning. The rating applies to AHS’s rated debt of $612 million, issued through the New Jersey Health Care Facilities Financing Authority, along with its planned $250 million transaction of series 2017 taxable bonds slated for Aug. 22. A stable outlook was also assigned to the system, whose flagship hospital is Morristown Medical Center.

Morristown Medical Center is the flagship hospital for New Jersey's Atlantic Health System.
Morristown Medical Center is the flagship hospital for New Jersey's Atlantic Health System. Atlantic Health System

“The upgrade to Aa3 reflects AHS' continued stability of operating performance and growth of the balance sheet,” said Moody’s analyst Meredith Moore in her Aug. 7 report. “Additionally, the rating incorporates AHS' favorable market position, strong revenue growth and provider of a wide array of tertiary and quaternary services.”

Moore noted that Atlantic Health is aided by its geography with five acute sites in locations with favorable and well-insured service areas. The multi-site hospital system has $2.5 billion in revenue and more than 100,000 in inpatient admissions and observation stays, according to Moody’s. It also has 253 days of cash on hand.

Moore added that Atlantic Health’s strengths are offset by increased leverage that has resulted in debt metrics below Aa3-rated peers. The health system has $1.3 billion in pro forma debt when factoring in operating leases and pension obligations. It also faces strong competition in northern New Jersey with a large presence of other healthcare providers.

“The stable outlook reflects our expectation that Atlantic Health System will continue to generate stable operating performance and maintain a healthy balance sheet to fund increasing, although manageable and affordable capital spending over the next three to five years,” said Moore.

Proceeds from Atlantic Health’s upcoming bond sale will be used for general corporate purposes, according to Moody’s. The bonds are secured by a gross revenue pledge of AHS Hospital Corp., which comprises roughly 91% of total system assets. The AHS Hospital Corp. includes Morristown Medical Center, Overlook Medical Center, Newton Medical Center, Chilton Medical Center and Hackettstown Medical Center.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.