CHICAGO - Standard & Poor's downgraded Centegra Health System in Illinois one notch to BBB ahead of plans to sell nearly $200 million of debt in a public offering and direct bank placements.
The downgrade from BBB-plus and assignment of a stable outlook comes ahead of the new $135 million fixed-rate issue selling through the Illinois Finance Authority.
"The rating action reflects our view of CHS' weakened balance sheet and light pro forma maximum annual debt service coverage," said analyst Suzie Desai.
The system is also directly placing nearly $60 million of variable-rate bonds with banks. They will not carry a rating. "We have incorporated initial terms into our analysis," Standard & Poor's said, adding it does not yet have the full documentation for those bonds.
The borrowing will go mostly to finance a hospital project in the far northwest Chicago suburb of Huntley that has been in the planning stages for the past several years, as well as other CHS projects, a capitalized interest fund, and cost of issuance, analysts said.
The rating reflects a sizable revenue base, good pro forma unrestricted reserves, and a conservative debt structure. "The stable outlook reflects our view of CHS' good market and business position," Standard & Poor's said.
The system currently operates hospitals in McHenry and Woodstock, all far northwest of Chicago.
JPMorgan is underwriter with Kaufman Hall as financial advisor and Chapman and Cutler LLP is bond counsel.
