NEW YORK - Standard & Poor's Ratings Services said it revised its rating outlook to stable from negative and affirmed its BBB rating on series 2004, 2003, and 1999 bonds issued for White River Health System WRHS), Ark. The bond issuers are Mountain View, Ark.; Batesville, Ark; and Arkansas Development Finance Authority, respectively.
Factors supporting the rating include maintenance of operating profitability in fiscal 2008, despite significant damage to WRHS's Stone County Medical Center from a February 2008 tornado; good debt service coverage of 2.9x at fiscal year-end 2008; modest leverage, coupled with improving liquidity; and strong market position in north-central Arkansas, highlighted by a market share of more than 60% within its primary service area.
Credit concerns include day's cash on hand and cash-to-debt metrics that remain weak for the rating; a rising level of uncompensated care, coupled with a more challenging economy that locally is causing some job losses; and ongoing issues related to the reconstruction of the Stone County Medical Center, following damage it suffered from a February 2008 tornado.
Management recently finalized plans to rebuild Stone County and expects completion by July or August 2010. Currently Stone County is operating 50% of the number of beds that were in operation before the storm, plus an operating room.
"The stable outlook reflects stable operational metrics, despite the operating challenges at Stone County, coupled with White River's improving balance sheet," said Standard & Poor's credit analyst Karl Propst. "Management has scaled back capital spending plans; however, within two to three years, management is contemplating an expansion that would likely entail the issuance of a modest amount of incremental debt," said Propst.
Standard & Poor's will evaluate any debt when the timing and size are available. A future upgrade is contingent upon consistent operating performance and further balance sheet improvement. Material deterioration to the balance sheet or White River's operating metrics could result in an outlook or rating change.
Securing the bonds is a pledge of the gross receipts of White River, which includes 199-licensed bed White River Medical Center, 25-licensed bed Stone County Medical Center, 97-bed Stone County Nursing and Rehabilitation Center, and 32-bed Mountain View Residential Care facility.
