Standard & Poor’s has upgraded Meridian Health System of New Jersey to A from A-minus.
S&P’s rating action on Monday affects $345.5 million in debt. Fitch Ratings gives Meridian an A rating. Moody’s withdrew its rating in November 2012.
“The upgrade reflects Meridian’s widening geographic coverage of its service area and financial metrics, which are completely consistent with ‘A’ system medians despite growing losses at one of its five hospitals,” said Standard & Poor’s credit analyst Cynthia Keller. “Southern Ocean Medical Center, despite its losses, is critical to the system for the coverage it provides in southern Ocean County, according to management, so the system board and management team have committed to a turnaround and have started to work much more closely with the local team to develop and implement performance improvement and physician recruitment plans.”
S&P’s stable outlook on its rating “reflects Standard & Poor’s view of Meridian’s very strong balance sheet, which provides a financial cushion for operations while management works through the issues at Southern Ocean Medical Center, coupled with steady earnings that have yielded solid debt service coverage, cash flow, and margins,” S&P stated.
The upgrade affects $201 million series 2011 bonds issued by the New Jersey Health Care Facilities Financing Authority for Meridian and the underlying rating for $144.5 million series 2007 fixed-rate bonds also issued by the authority for Meridian. The 2007 bond is insured by Assured Guaranty, which S&P rates AA-minus.
Meridian has a total outstanding debt of $646 million, Keller said. S&P does not rate the remainder of the debt either because it is old or because it is associated with newly acquired parts of the system, she said.