CHICAGO – Illinois-based Presence Health now carries the healthier ratings of St. Louis-based Ascension Health Alliance.
Moody's Investors Service on Thursday upgraded Presence Health’s $1 billion of debt all the way to Aa2 from Baa3 “in conjunction with a change in bondholder security” following Ascension’s acquisition of Presence and its backing of the debt in its master trust indenture. The outlook is stable.
S&P Global Ratings on May 29 raised Presence to AA-plus from BBB-minus. The outlook is stable.
Ascension is the nation's largest not-for-profit healthcare system.
"The upgrade reflects the March 2018 acquisition of Presence by AA-plus rated Ascension Health Alliance and the May 23, 2018 closing of the substitution of the Ascension senior master trust indenture obligation for the Presence MTI obligation," said S&P analyst Stephen Infranco. “As such, the Presence Master Indenture was discharged and Ascension has assumed responsibility and is now obligated for Presence's rated 2016C bonds.”
The Presence bonds were sold through the Illinois Finance Authority.
Ascension operates 108 general acute care hospitals in 22 states and Washington, D.C. that along with other facilities are valued at $34 billion and generate about $22 billion of annual revenue.
“Ascension is a true national practice, with an exceptional management team that influences health care on a national level, with a proven commitment to providing clinically excellent, affordable, and available health care. Ascension has developed strong central governance and consolidated service lines, both clinical and nonclinical,” S&P said.
Presence is now owned by Ascension but is a member of AMITA Health, a joint venture of the Ascension-owned Alexian Brothers Health System and Adventist Midwest Health System which is part of Adventist Health System.
Presence was formed in 2011 through the merger of Provena Health and Resurrection Health Care Corp. and operates nine acute care hospitals with about 2,216 beds in Chicago and other communities in the state. It reported $2.7 billion of revenue in 2016. It has struggled to right its balance sheet over the last two years but has trimmed operating losses as a turnaround plan began to yield results.
Two acute care hospitals, Presence Covenant Medical Center and Presence United Samaritans Medical Center, as well as Resurrection University and Presence Health Network, were not part of the Ascension transaction.
AMITA operates nine hospitals, more than 80 clinics and outpatient facilities in the Chicago region.
Presence’s 2016 deal was recognized in the healthcare category by The Bond Buyer at its 2016 Deal of the Year awards -- it restructured existing debt and gave the system some breathing room for its turnaround plan to take hold.
Fitch Ratings on Monday raised Presence Health to AA-plus – Ascension’s current rating -- with a stable outlook from BBB to reflect the master trust indenture substitution. “Fitch expects at the parent level, that liquidity metrics will remain solid and operating profitability should remain in line with historical results, with a continued light debt burden,” Fitch wrote.