Moody’s Investors Service has upgraded Riverside Health System’s credit one notch to A2 due to a track record of strong operating performance as RHS prepares to issue $68 million of fixed-rate new-money and refunding bonds early next month.
The upgrade affects $161 million of debt, including the upcoming sale. The system uses the Illinois Finance Authority to access the tax-exempt market. Moody’s revised its outlook to stable from positive.
Proceeds will refund outstanding variable-rate debt, reimburse $35 million of capital expenditures, contribute to a debt service reserve fund, and back a swap termination payment estimated at $1.8 million.
The obligated group includes the Riverside Health System parent and most affiliates, including Riverside Medical Center, Riverside Senior Living Center, and Oakside Corp.
RHS’ strengths include a leading market share in the two-hospital market of Kankakee County, and a good market position in Will County, which is part of the Chicago metro region. RHS competes with Provena St. Mary’s Hospital.
Riverside posted an operating cash-flow margin of at least 10.4% since fiscal 2000. Despite losses in the equity markets, it maintains good liquidity with 244 days cash on hand at the end of fiscal year 2008, according to Moody’s.
The system’s challenges include a 30% increase in its debt load, of which 69% is in a variable-rate mode, although the upcoming refunding will drop that ratio to 40%. It also faces construction risks associated with the building of a new three-story patient tower. RHS is also reliant on one large managed care payor in the market.
Standard & Poor’s affirmed the system’s A rating. Analysts said the rating reflects RHS’ growing patient utilization and market share trends from the operation of the 330-bed Riverside Medical Center. It is also the exclusive local provider of neuro and open-heart surgery.