UMass Memorial Health Care, MA#s 2017L Revenue Bonds Rated #BBB+#

Stocks and Financial Services Press Releases Thursday December 7, 2017 09:01
NEW YORK--7 Dec--S&P Global Ratings

NEW YORK (S&P Global Ratings) Dec. 6, 2017--S&P Global Ratings assigned its 'BBB+' long-term rating to Massachusetts Development Finance Agency's $130 million series 2017L fixed-rate revenue bonds issued for UMass Memorial Health Care (UMass Memorial). At the same time, we affirmed our 'BBB+' long-term rating on the agency's series 2010G, 2011H, and 2016I revenue bonds, as well as our 'BBB+' underlying rating (SPUR) on the series 1998B bonds, all issued for UMass Memorial. The outlook is stable.

Bond proceeds will be used to finance various improvements and expansion projects at UMass Memorial's flagship UMass Memorial Medical Center (UMMMC) and at HealthAlliance – Clinton Hospital. Depending on market conditions, proceeds may also refund $61 million of outstanding series 2011H bonds.

"Supporting the rating is UMass Memorial's strong market position as the major teaching hospital of the commonwealth's only public medical school and as the sole provider of tertiary care in central Massachusetts," said S&P Global Ratings credit analyst Cynthia Keller. UMass Memorial Community Hospital's two owned community hospitals and several affiliated providers help solidify UMMMC's market position and provide lower-cost clinical settings for the system. In addition, UMass Memorial's widespread employed and faculty physician network is a strength. While retaining its operational focus, management is also increasingly focused on various strategic initiatives, including ambulatory expansion, which we view positively.

The stable outlook reflects UMass Memorial's enterprise characteristics and adequate balance sheet, which we believe are sufficient to support the rating during a temporary period of limited earnings and cash flow and uncertainty surrounding UMass Memorial's Medicaid revenue.

Maintenance of the rating and stable outlook during the two-year outlook period is predicated on generally keeping unrestricted reserve balances above outstanding debt and over 100 days' cash on hand. In addition, we could lower the rating or outlook if UMass Memorial begins to post a trend of higher operating losses that are insufficient to generate about 2.5x DSC.

A higher rating is unlikely during the outlook period as somewhat softer margins are likely to continue into 2018. However, a higher rating over time could be possible once UMass Memorial establishes a multiyear financial trend consistent with a higher rating level. Other important rating factors include future stability of MSF and the amount of disproportionate share payments.


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