Ratings upgrade for Adventist Health

Adventist Health received a ratings upgrade from Fitch Ratings for a $240.86 million bond issuance that will fund its office expansion in Roseville, California.

The rating agency assigned an A-plus to the Series 2018A revenue bonds that will be issued through the California Statewide Communities Development Authority.
Fitch also upgraded from A to A-plus the Issuer Default Rating and the long-term rating on $919 million in outstanding debt.

The ratings outlook was revised from positive to stable.

“The 'A-plus' long-term rating reflects Fitch's view of Adventist's position as the leading acute care provider in multiple growing markets, supporting midrange revenue defensibility, despite its comparatively higher levels of Medicaid and Self-Pay volumes, in combination with consistently improved operations and growing balance sheet strength,” Fitch’s analysts said in a report.

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Adventist Health has 20 hospitals in four regions in California and the Northwest and brought in $4.1 billion in revenue in 2017, the report stated.

A high level of Medicaid patients – over 30% – remains a credit challenge, but that has been mitigated by an increase in provider fee funding from California, Fitch's analysts said.

“Fitch expects Adventist to continue to demonstrate strong cost management as it grows in size and scale over the next several years on its goal to be $6 billion by 2022,” the report stated.

Adventist Health has begun construction on a new corporate headquarters building on 28 acres in Roseville. The project, expected to be completed in January 2019, will consolidate about 900 employees now working at five leased spaces in the city, according to a project description.

About $70 million of the bond proceeds will be used to reimburse for prior capital expenditures and $112 million will advance refund a 2011 series by the Fremont-Rideout Health Group in Marysville, California, which as of April 2018 became part of Adventist Health.

Orrick, Herrington and Sutcliffe is the bond counsel for the deal. J.P. Morgan Securities, Bank of America Merill Lynch and RBC Capital Markets are the underwriters.

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Hospitals and clinics California
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