CHICAGO — Six months after announcing a proposed merger, Michigan-based Trinity Health and Pennsylvania-based Catholic Health East said Thursday they have closed the deal.
The partnership will create the second-largest health care system in the country, with 82 hospitals across 21 states and $13.3 billion of annual revenues, hospital officials said. Only St. Louis-based Ascension Health is larger.
The merger is one of many popping up across the health care sector as providers ramp up scale to better deal with the upcoming federal health care law. Henry Ford Health System and Beaumont Health System, two other major Michigan providers, announced plans to merge late last year just days after Trinity’s announcement.
“The consolidation will help address the rapidly changing health care environment that requires more focus on population health and the delivery of more coordinated and integrated care and health and wellness services,” said Judith Persichilli, interim president of the new system.
The two systems will for now maintain separate credit structures for their outstanding bonds, according to a disclosure notice filed on the Municipal Securities Rulemaking Board’s EMMA website. As of the May 1 official close of the deal, neither system has assumed or provided a guarantee for each other’s bonds, but the possibility will be considered, the notice said. Officials will consider combining the two credit groups, refinancing some or all of the debt, or substituting some of the support for the bonds.
Trinity has $3.2 billion of outstanding long-term debt and a $400 million taxable commercial paper program. It is rated double-A with a stable outlook by all three rating agencies.
Catholic Health East had $1.52 billion of outstanding debt as of September 2012, according to bond documents. CHE also had 27 interest-rate swap transactions that hedged $960 million of its bonds. The swaps together had a market liability of $2.4 million as of the end of September.
Moody’s Investors Service rates Catholic Health East A2. Standard & Poor’s rates it A and Fitch Ratings A-plus. A recent Fitch report said a successful merger with Trinity would likely prompt its outlook on CHE to be raised to positive from stable. When the proposed merger was announced last October, S&P said a consolidation would likely result in a credit with a weaker rating than Trinity’s AA rating.
Moody’s last October said the merger would be positive for the sector, and that in the short term it would be credit positive for Catholic Health but credit negative for Trinity Health. The new organization, which is not yet named, will be based in Livonia, Mich.