New York, September 28, 2021 -- Moody's Investors Service assigned a Baa3 to Good Samaritan Hospital's (IN) proposed Health Facilities Revenue Bonds, Series 2022A (Good Samaritan Hospital) (Forward Delivery) ($56 million). The bonds will be issued through the Indiana Finance Authority. Simultaneously, Moody's affirmed Good Samaritan Hospital's (GSH) existing Baa3 bond ratings. The outlook is stable. The system has approximately $106 million of outstanding debt.
RATINGS RATIONALE
The assignment and affirmation of the Baa3 rating reflects Moody's view that GSH's role as an essential provider with limited local competition will support its leading market position. While somewhat lower in 2021, margins will remain solid and above pre-2019 levels, driven by strategic growth opportunities such as behavioral health, a recently added telestroke program and the continued development of a graduate medical education program, along with revenue cycle and cost savings initiatives. Liquidity metrics will continue to improve even excluding Medicare Advanced Payments, as a result of solid cash flow and limited capital needs. However, the hospital's revenue growth will be constrained by a higher than average dependency on Medicaid and Medicare and limited population growth in a rural service area. Further, the ongoing pandemic will contribute to variability in volumes and elevated staffing costs. Other challenges include the system's small revenue base, which will limit financial flexibility.
RATING OUTLOOK
The stable outlook reflects our expectations that Good Samaritan Hospital will maintain strong operating results that will allow for continued liquidity growth and deleveraging.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
- Material enterprise growth
- Notable reduction in leverage
- Maintenance of strong margins and further improvement in liquidity metrics
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
- Additional debt or significant weakening of debt measures
- Meaningful and sustained decline in financial performance of the core hospital
- Significant reduction in liquidity
LEGAL SECURITY
Existing bonds are secured by a joint and several obligation of pledged revenues and mortgage pledge of the obligated group. Nursing home revenues are excluded in the pledged revenues and may be subject to other senior liens of the respective operators; many of the nursing home facilities are in other security arrangements related to their debt. The nursing home agreements are terminable after 90 days without cause and up to 30 days upon an event of default or bankruptcy.
Upon consent from more than 50% of bondholders, an amended and restated Master Trust Indenture (MTI) will become effective at which time the Borrower will provide notice of such effectiveness to holders of the bonds. Among other amendments, there will be changes to the financial covenants and the security pledge. Upon the effectiveness of the amended and restated MTI, the mortgage will be terminated and released, and bond notes will not be secured by a mortgage. The amended and restated MTI may be released, or replaced by an alternate indenture with materially different terms, covenants and security pledge, on certain conditions, and without the consent of bondholders.
USE OF PROCEEDS
The proposed Series 2022A bonds will be used to refund the Series 2012A bonds and finance various capital projects.
PROFILE
GSH is a 501(c)(3) acute care hospital with 144 beds located in Vincennes, Indiana. The hospital is owned by Knox County and a component unit of the county. GSH is the licensed operator of twelve nursing facilities located throughout Indiana; through leasing arrangements, the hospital contracts with third-party operators to manage day to day facility operations. The property and revenues of the nursing facilities are excluded from pledged revenues.
METHODOLOGY
The principal methodology used in these ratings was Not-For-Profit Healthcare published in December 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1154632. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 credit rating action on the support provider and in relation to each particular credit 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.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
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Nansis Hayek
Lead Analyst
PF Healthcare
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Lisa Martin
Additional Contact
PF Healthcare
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
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