Moody's Investors Service said it upgraded the rating on the Sierra Kings Health Care District, Calif.’s existing general obligation bonds to Baa1 from Baa3.
It assigned a Baa1 rating to the district's 2015 general obligation refunding bonds. The bonds have an expected par value of $28 million.
The outlook is stable.
The rating upgrade reflects the district's September 30, 2015, emergence from its 2009 bankruptcy. The district's bankruptcy included 100% repayment to its creditors as per its plan of adjustment.
The rating also incorporates the district's simplified operations resulting from leasing the hospital facility for use by Adventist Health. This move relieves the district of any of the day to day responsibilities of managing the hospital or attendant employees.
This lease combined with the bankruptcy allowed the district to significantly improve its financial profile, reflected by solid recent operating surpluses and healthy liquidity. Though the district's current management and governance has been effective, it will face the challenge of transitioning to permanent staff and filling a currently vacant board position.
However, Moody’s does not expect significant disruption given the limited scope of the district's operations.
The rating also encompasses the district's small but growing Central Valley agricultural economy. While the tax base continues to recover from the impacts of the recession, income and employment remain low relative to the national medians and are unlikely to materially improve. The district's low debt burden will continue to be a credit positive since the district has no remaining debt authorization or plans to issue new bonds.
The upgrade of the GO rating includes the nature of the California GO pledge, which is secured by the district's voter-approved unlimited property tax pledge. Fresno County rather than the district will levy, collect, and disburse the district's property taxes, including the portion constitutionally restricted to pay debt service on general obligation bonds.
