Fitch Ratings last week downgraded Resurrection Health Care one notch to BBB-plus due to operating losses.

The downgrade came as the Chicago-based system announced plans to sell two of its hospitals and ahead of Ressurection’s sale of $120 million of fixed-rate bonds through the Illinois Finance Authority to refund existing floating-rate debt ahead of the expiration of letters of credit that support the debt.

Bank of America Merrill Lynch is the senior manager and Jones Day is bond counsel. Resurrection holds a 31% market share and has ratings of BBB-plus from Fitch and Standard & Poor’s and Baa1 from Moody’s Investors Service. The latter two assign a negative outlook to the credit and its $600 million of debt.

“The downgrade reflects RHC’s sizable operating losses in fiscal 2008 and 2009, an erosion in inpatient volumes and payor mix, and a sizable unfunded pension liability,” Fitch analysts wrote.

In fiscal 2008 and 2009, Resurrection posted operating losses of $81.1 million and $68.7 million.  Fitch described as positive credit factors the solid balance-sheet position with nearly $800 million of unrestricted cash and investments and positive changes in management.

RHC is made up of eight hospitals with 1,673 staffed beds, 14 long-term care facilities and other related health care entities that generated total operating revenues of $1.7 billion in fiscal 2009.

The system last month announced the sale of its Westlake Hospital in Melrose Park and West Suburban Medical Center in Oak Park to for-profit Vanguard Health Systems. Financial details of the transaction were not disclosed.

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