New York, November 13, 2012 --
Issue: Hospital Revenue Bonds, Series 2012A; Rating: Baa1; Sale Amount: $177,825,000; Expected Sale Date: 11/21/2012; Rating Description: Revenue: 501c3 Unsecured General Obligation
Moody's Investors Service has assigned a Baa1 rating to Barnabas Health's (previously known as Saint Barnabas Health Care System, referred to in this report as "Barnabas") $177.825 million of Series 2012A fixed rate bonds to be issued by New Jersey Health Care Facilities Financing Authority. The rating outlook has been revised to stable from positive. At this time we have upgraded the rating to Baa1 from Baa2 on Barnabas' outstanding bonds.
SUMMARY RATING RATIONALE
The Baa1 rating and stable outlook reflect the continued and pronounced turnaround at Barnabas under the direction of new financial leadership and a reinvigorated senior management team. Performance improved again in FY 2011 over FY 2010 and is continuing through the first nine months of FY 2012 ending September 30, 2012. We expect that FY 2012 will be another favorable year, pointing to durable credit strengthening that began in FY 2009 when the board and executive leadership brought in new financial management and set in place multi-year financial plans to take better advantage of Barnabas's size, scope and geographic coverage in New Jersey. The improved credit position is offset by a sizeable amount of indirect debt, including operating leases and an underfunded pension, and continued declines in inpatient volumes system-wide. In addition, many of the Barnabas hospitals are operating in highly competitive local markets. Finally, the system continues to make progress on its effort to evolve from a holding company to a more centralized operating model, but this will be a multi-year process.
* Continued improvement in financial performance that demonstrates the durability of Barnabas' financial recovery; through the first nine months of FY 2012 the operating cash flow margin reached 11.6%, up from 10.3% in the prior year comparable period and ahead of 10.5% in FY 2011
* Growth in liquidity as of September 30, 2012 with $888.1 million in unrestricted cash and investment, equating to 141 days and up from $781.1 million or 121 days at the end of FY 2011; growth driven by cash flow, revenue cycle management and limited capital spending
* Cash to debt is approaching 100% (90.1% as of September 30, 2012) as cash balances have improved; capital spending will increase to 1.0 times per year for the next four years, more in line with national spending trends and addresses Moody's concerns regarding limited capital spending in the recent past
* Improved debt coverage measures with 3.3 times debt to cash flow and Moody's-adjusted maximum annual debt service coverage of 5.4 times on an annualized FY 2012 basis, from weaker 3.7 times and 4.8 times in FY 2011, respectively
* Largely fixed rate debt structure (92%) with no exposure to interest rate derivatives
* Continued centralization of Barnabas Health as a system under the direction of new leadership, following its origins as a holding company model; Barnabas and its board developed a new strategic plan at its recent inaugural board retreat since the system's creation 16 years ago
* Material 3.9% decline in inpatient volumes through nine months of FY 2012, continuing a trend of declining volumes; five of the six facilities are showing declines
* Material amount of indirect debt with a pension liability of $227 million at the end of FY 2011 (up from $189 million in FY 2011) as the discount rate declined and $219 million in operating leases (using a 6 times multiplier method); cash to total comprehensive debt declines to 53.8% in FY 2011 and below the Baa1 median of 67.7%
* Very high 93% debt to capitalization in FY 2011 as the system rebuilds its equity; since declined to 75% as of September 30, 2012
* Highly competitive local markets for inpatient and outpatient care, particularly in central and northern New Jersey
* Reliance on charity care funds which represents one-third of FY 2011 operating cash flow, although down from very high two thirds in FY 2009
* Kimball continues to post losses with $2.7 million loss through September 30, 2012 and a projected loss of $5.6 million for FY 2012
* Increased payments on the final two years of DOJ settlement with $32 million paid in FY 2012 and $30 million due in FY 2013
The stable outlook reflects expectations that financial performance will produce good debt service coverage while balance sheet indicators should show some improvement, even as capital spending increases and pension contributions that exceed pension expense will continue.
WHAT COULD MAKE THE RATING GO UP
Improvement in financial performance and liquidity measures, further de-leveraging; no decrease in market share in its local markets
WHAT COULD MAKE THE RATING GO DOWN
Departure from current results; erosion of liquidity; changes in local market share
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.
The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, 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 has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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.
Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information, and confidential and proprietary Moody's Analytics' information.
Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses in assigning a 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.
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.
Lisa Goldstein Associate Managing Director Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Jennifer Ewing Associate Analyst Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 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."
Any publication into Australia of this document is by MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657, which holds Australian Financial Services License no. 336969. 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.
Notwithstanding the foregoing, credit ratings assigned on and after October 1, 2010 by Moody's Japan K.K. ("MJKK") are MJKK's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. In such a case, "MIS" in the foregoing statements shall be deemed to be replaced with "MJKK". MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO.
This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser.
Heute im Fokus
Borussia Dortmund beschließt Dividende von zehn Cent je Aktie. Erfolgsbilanz für Hamburger Hafen. Warum die Apple-Aktie ein Basisinvestment bleibt. Nowotny rät EZB zum Abwarten. BT Group spricht mit Telefonica UK über Kauf des Mobilfunkgeschäfts. BHP Billiton drosselt Investitionen weiter.
Wenn Zukunft Gegenwart wird
Diese Aktien sind auf den Kauflisten der Experten
Das sind Deutschlands Global Player