Two rating agencies changed their outlooks for St. Anthony’s Medical Center in conjunction with their release of updated credit reviews.

Moody’s Investors Service affirmed its A2 underlying credit but revised its outlook to stable from positive. Standard & Poor’s affirmed it’s A-plus but revised its outlook to negative from stable.

The hospital has $152 million of outstanding rated debt. It issues through the Missouri Health and Educational Facilities Authority.

Analysts attributed their action to St. Anthony’s recent weaker operating performance, including an operating loss for fiscal 2008, coupled with some balance-sheet pressure as capital expenditures remain elevated for the next year.

Credit factors in the hospital’s favor include a strong balance sheet, supported by liquidity and cash-to-debt levels that are consistent with an A-plus rating, Standard & Poor’s wrote. The balance sheet was helped by the $45 million sale of St. Anthony’s medical office buildings in fiscal 2008. The hospital also benefits from good volume trends and a leading market share of 39% in its large service area.

Concerns include the medical center’s weaker, but still positive, operating margins in fiscal 2007, with a $3.7 million operating loss based on unaudited fiscal 2008 numbers, which are both below previous forecasts, and competition in the St. Louis market, including a replacement hospital being built by competitor SSM Healthcare.

“If St. Anthony is able to meet its operating targets and maintain its balance-sheet strength over the next year or two, we might revise the outlook back to stable,” Standard & Poor’s analyst Suzie Desai wrote. “If operations continue to remain weak or generate a loss, however, we will likely lower the rating.”

St. Anthony, located in South St. Louis, has about $112 million of capital spending plans over the next three years, including the construction of a new four-story heart and surgical pavilion, which is expected to open in September 2008, according to Moody’s. The new pavilion will include 64 private patient rooms, 10 new operating rooms, and 16 new intensive-care unit beds. No additional debt is planned.

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