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Moody's Investors Service revised the outlook on Texas Health Resources' long term debt rating to developing from positive. Concurrently the Aa3 and Aa3/VMIG1 ratings are affirmed.
SUMMARY RATING RATIONALE
The revision of the outlook to developing from positive reflects a high degree of uncertainty about Texas Health Resources' (THR) financial performance after the Ebola-related situations at one of the system's flagship hospitals, Texas Health Presbyterian Hospital Dallas (17% of system net patient revenues in FY 2013). These events may result in operational and reputational impairment, which may be either short or long term. At this time, the impact on the system's otherwise positive fiscal position cannot be known.
The scale of the multi-hospital system (roughly over $3.5 billion total consolidated revenue in FY 2013) supports the rating affirmation at this time. Good debt service coverage, combined with its good liquidity profile, provide cushion to absorb a short-term negative impact on performance. Moody's continues to expect that THR will maintain its sound liquidity profile, with centrally held unrestricted cash and investments of approximately $3 billion as of FYE 2013. In addition, there are no material near-term debt maturities that could impair liquidity. Coverage of THR's variable rate debt backed by internal liquidity ($165 million) is ample, 5.3 times, as of September 30, 2014.
A longer-term disruption in financial performance or significant financial stress, including a permanent reduction in volumes, damage to the brand, or liabilities in excess of insurance may result in negative rating pressure. This event is also a material distraction for management and will consume resources that would otherwise be devoted to growing the enterprise. Moody's analysis will examine patient volume and census trends, malpractice and other insurance levels and updated liquidity information.
http://www.streetinsider.com/Credit...llowing+Ebola-Related+Situations/9920057.html
SUMMARY RATING RATIONALE
The revision of the outlook to developing from positive reflects a high degree of uncertainty about Texas Health Resources' (THR) financial performance after the Ebola-related situations at one of the system's flagship hospitals, Texas Health Presbyterian Hospital Dallas (17% of system net patient revenues in FY 2013). These events may result in operational and reputational impairment, which may be either short or long term. At this time, the impact on the system's otherwise positive fiscal position cannot be known.
The scale of the multi-hospital system (roughly over $3.5 billion total consolidated revenue in FY 2013) supports the rating affirmation at this time. Good debt service coverage, combined with its good liquidity profile, provide cushion to absorb a short-term negative impact on performance. Moody's continues to expect that THR will maintain its sound liquidity profile, with centrally held unrestricted cash and investments of approximately $3 billion as of FYE 2013. In addition, there are no material near-term debt maturities that could impair liquidity. Coverage of THR's variable rate debt backed by internal liquidity ($165 million) is ample, 5.3 times, as of September 30, 2014.
A longer-term disruption in financial performance or significant financial stress, including a permanent reduction in volumes, damage to the brand, or liabilities in excess of insurance may result in negative rating pressure. This event is also a material distraction for management and will consume resources that would otherwise be devoted to growing the enterprise. Moody's analysis will examine patient volume and census trends, malpractice and other insurance levels and updated liquidity information.
http://www.streetinsider.com/Credit...llowing+Ebola-Related+Situations/9920057.html