Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Enter the above code here:
Can't read?
Try a new set
Send Cancel
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
OK
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
OK
Rating Action:

Moody's affirms Elmhurst Memorial Healthcare's (IL) Baa2 long-term and underlying bond ratings; Outlook revised to negative from stable

Global Credit Research - 10 Jan 2013

Action affects approximately $495 million of rated debt outstanding

New York, January 10, 2013 --

Moody's Investors Service has affirmed Elmhurst Memorial Healthcare's (EMHC) Baa2 long-term rating. The rating outlook is revised to negative from stable, reflecting EMHC's weak operating performance in the first quarter (Q1) of fiscal year (FY) 2013 and continued aggressive debt and swap structure. This action affects approximately $495 million of rated debt outstanding. Rated debt includes Series 2008B,C,D,&E variable rate demand obligation (VRDO) bonds. The Series 2008B,C,D,&E VRDO bonds are supported by letters of credit (LOC) from JPMorgan Chase Bank, N.A., RBS Citizens, N.A., The Northern Trust Company, and Fifth Third Bank. The LOCs expire July 15, 2013, although management expects to receive extensions on the LOCs in the coming weeks (the rating decision factors our expectation that EMHC successfully will receive extensions/renewals on its LOCs).

SUMMARY RATING RATIONALE

The affirmation of the Baa2 rating reflects the fact that EMHC is beyond construction risks as the new replacement hospital opened in June 2011 (on time and under budget, according to management) and factors EMHC's improved operating performance in full year FY 2012. The negative outlook reflects EMHC's downturn in operating margins, from an adjusted operating cash flow margin of 7.4% in full year FY 2012 to 4.3% through five months FY 2013 (after EMHC had shown considerable improvement in the second half of FY 2012). While the decline in performance in interim FY 2013 is due in part to an increase in non-cash pension expense, core operating challenges surfaced such as inpatient volume declines (6.4% decrease in five months FY 2013, compared to the same period FY 2012). We are particularly sensitive to the weak performance in interim FY 2013 given EMHC's high debt load and debt/swap structure.

STRENGTHS

*While down from historically high levels, EMHC's absolute level of cash on hand remains favorable at the Baa2 rating level with adjusted 205 days cash on hand at fiscal year end (FYE) 2012 and 218 days at September 30, 2012. Management expects to grow cash in FY 2013 and beyond.

*EMHC's operating cash flow margin improved in full year FY 2012 (7.4% margin) compared to full year FY 2011 (3.8% margin) and through six months FY 2012 (4.5% margin).

*Favorable service area (the City of Elmhurst's general obligation rating is Aa1).

*With the replacement hospital operational since June 2011, EMHC's capital spending plans are manageable in the coming years. EMHC's average age of plant measured a low 6.4 years at FYE 2012 (all rating median is 10.5 years).

CHALLENGES

*Very leveraged Moody's adjusted debt coverage ratios (136% debt-to-total operating revenue, 20.2 times debt-to-cash flow, 1.7 times maximum annual debt service coverage, 40% cash-to-direct debt, and 84% cash-to-demand debt based on FY 2012 results).

*Weak operating results in Q1 FY 2013 (4.0% operating cash flow margin); while improved in subsequent months, based on adjustments to management prepared interims, EMHC's operating margins remain modest through five months FY 2013 (4.3% operating cash flow margin) and significantly behind plan.

*Approximately 50% of EMHC's debt was in VRDO mode at FYE 2012. EMHC has LOCs with four banks, including RBS (P-2 short-term rating) and Fifth Third Bank (P-2 short-term rating). EMHC's cash-to-demand and monthly liquidity-to-demand debt measured modest 84% and 72%, respectively, at FYE 2012.

*EMHC has a sizeable swap program with a total notional amount ($490 million at FYE 2012) that approached EMHC's total debt outstanding ($527 million) at FYE 2012. The swaps are spread among five counterparties.

*EMHC's defined benefit pension plan was $62 million underfunded at FYE 2012 (based on FASB accounting) compared to a pension benefit obligation of $228 million (73% funded ratio). Management notes that on an IRS funding basis, the plan had a funding ratio of 120% at January 1, 2012 (due to the different discount rate methodologies used by the IRS and FASB). Management notes that while there were no funding requirements to the plan on an IRS basis in the last two years, EMHC has made employer contributions of $5 million per year over the period.

*Competitive market with multiple hospital providers in EMHC's primary service area (PSA) and secondary area.

OUTLOOK

The negative outlook reflects EMHC's downturn in operating margins in interim FY 2013 (from an adjusted operating cash flow margin of 7.4% in full year FY 2012 to 4.3% through five months FY 2013). While the decline in performance in interim FY 2013 is due in part to an increase in non-cash pension expense, core operating challenges surfaced such as inpatient volume declines (6.4% decrease in five months FY 2013, compared to the same period FY 2012). We are particularly sensitive to the weak performance in interim FY 2013 given EMHC's high debt load and debt/swap structure.

WHAT COULD MAKE THE RATING GO UP

Unlikely in the near term given the negative outlook. Over the longer-term a sustained improvement in operating cash flow that translates into meaningful strengthening of margins; material improvement in debt coverage ratios; rebound in balance sheet measures

WHAT COULD MAKE THE RATING GO DOWN

Continued modest operating margins; any weakening of debt ratios leading to violation of financial covenants in LOC reimbursement agreements; unexpected weakening of cash position; significant market share loss

RATING METHODOLOGY

The principal methodology used in this rating was Not-For-Profit Healthcare Rating Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Please see the credit ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Mark Pascaris
Vice President - Senior Analyst
Public Finance Group
Moody's Investors Service, Inc.
100 N Riverside Plaza
Suite 2220
Chicago, IL 60606
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Lisa Goldstein
Associate Managing Director
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms Elmhurst Memorial Healthcare's (IL) Baa2 long-term and underlying bond ratings; Outlook revised to negative from stable
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

 


ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable, including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

 


MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

 


For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for retail clients to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.
© 2013 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.
Regional Sites: