October 1, 2012 / 6:41 PM / 7 years ago

TEXT-Fitch raises St. Peter's Health Partners, N.Y. bonds to 'BBB+'

Oct 1 () - Fitch Ratings has upgraded the rating on St. Peter's Health
Partners, NY's (SPHP) outstanding debt issued by the Albany Capital Resource
Corporation and the Albany Industrial Development Authority to 'BBB+' from 'BBB'
as follows: 

--$34.1 million series 2011; 

--$213.2 million series 2008A-E. 

The Rating Outlook remains Positive. 

SECURITY: Debt payments are secured by a pledge of gross revenues and a first 
mortgage lien on property of the obligated group, consisting of St. Peter's 
Hospital only. A fully funded debt service reserve fund provides additional 
security. 

KEY RATING DRIVERS

COMPLETED SPHP MERGER: The rating upgrade to 'BBB+' reflects the realized 
benefits and financial performance of SPHP after the completed merger between 
St. Peter's Health Care Services, Northeast Health, and Seton Health in October 
2011. Among other things the combined entity, unified under one management 
structure, benefits from its size (more than $1 billion in annual revenues) and 
scale (acute, post-acute and long-term care services) in New York's capital 
region, an improved market position, and solid profitability and liquidity.   

CATHOLIC HEALTH EAST AFFILIATION: SPHP is a non-obligated affiliate member of 
Catholic Health East (CHE; revenue bonds rated 'A+'; Stable Outlook by Fitch) 
which provides managerial, financial, and strategic services and expertise.  

SOLID FINANCIAL PROFILE: As of June 30, 2012 (six-months; unaudited), SPHP had a
solid financial profile highlighted by good balance sheet metrics and 
operational profitability resulting in strong maximum annual debt service (MADS)
coverage.  

ENHANCED MARKET POSITION: Upon completion of the merger, SPHP became the market 
share leader with a 41.5% market share position in 2011 compared to its nearest 
competitor, Albany Medical Center, at (22.4%).  Fitch views SPHP's market share 
position as a primary credit strength.  

WHAT WOULD TRIGGER AN UPGRADE: Positive rating movement to the 'A' category 
could occur if SPHP continues on its positive financial track, and successfully 
consolidates/integrates key organizational functions while beginning to realize 
benefits of last year's merger, and creates an obligated group composed of all 
SPHP's major entities, which would provide additional security to bondholders. 

CREDIT PROFILE

RATING UPGRADE TO 'BBB+'

The rating upgrade to 'BBB+' from 'BBB' is supported by the benefits accruing 
from the completed merger between St. Peter's Health Care Services, Northeast 
Health, and Seton Health in October 2011 to form SPHP.  The organization 
benefits from its revenue size and the efficiencies that can be gained as a 
merged entity as well as the continuum of healthcare services offered and the 
benefits from its strong relationship with CHE. 

Further, on a combined basis the organization's financial performance is 
improved and Fitch expects further gains as the organization implements a 
strategy of certain service consolidation and standardization. Specifically, 
through the six-month interim period (June 2012), SPHP recorded $12.5 million in
operating income on total revenues of $532.6 million translating into a 2.4% 
operating margin and 9.9% operating EBITDA margin. These compare favorably to  
Fitch's respective 'A' category medians of 2.8% and 9.8%. SPHP's solid 
profitability metrics helped support strong MADS coverage by EBITDA of 4.1x 
through the same period, consistent with 'A' category median of 4.1x. SPHP's 
debt burden is moderate as measured by MADS as a percentage of revenue of 2.6%. 
 

At June 30, 2012 SPHP had approximately $392.9 million in unrestricted cash and 
investments, which equates to 147.1 days cash on hand, 14.3x cushion ratio, and 
106.1% cash to debt. 

Fitch's primary credit concerns include SPHP's relatively large capital plan, 
the competitive service area, and risk associated with the merger's 
consolidation efforts. SPHP's five-year capital plan calls for approximately 
$515.9 million of capital expenditures for various projects. Management intends 
to fund a majority of capital investment from cash flow, which Fitch views as 
reasonable assuming expected financial efficiencies stemming from merger-related
streamlining activities. SPHP's service area remains competitive with the 
presence of Albany Medical Center.  

OUTLOOK

The Positive Rating Outlook reflects Fitch's belief that SPHP will continue to 
accrue benefits resultant from the organization's merger. Positive rating 
movement could occur if SPHP continues on its positive financial track and 
successfully consolidates/integrates key organizational functions. Although SPHP
has a somewhat large capital plan over the medium term, Fitch believes that 
operational efficiencies from the merger will provide adequate operational cash 
flow to absorb such strategic investments.   

DEBT PROFILE & DISCLOSURE

SPHP's outstanding debt profile is composed of approximately 74% fixed-rate and 
26% variable-rate debt. As of June 30, 2012, SPHP had three outstanding swaps 
with a notional amount of $48.7 million and a market valuation of negative $5.6 
million. SPHP has no collateral posting requirements on its outstanding swaps. 
Overall, Fitch views the organization's debt portfolio as relatively 
conservative. 

SPHP covenants to provide bondholders with annual audited financial statements 
including management's discussion and analysis, balance sheet, income statement,
cash flow statement, and utilization statistics no later than 150 days after the
fiscal year-end and quarterly disclosure 45 days after the end of the quarter. 

ORGANIZATIONAL OVERVIEW

St. Peter's Health Partners is an integrated health delivery network with a 
total revenue base of approximately $1 billion in fiscal 2012 (unaudited). SPHP 
is the largest comprehensive care network in its service area providing a full 
range of hospital-based services, long-term care, hospice, rehabilitation, and 
elderly care with four acute care hospitals and more than 1,000 physicians in 
its physician network. 

Contact:

Primary Analyst

Michael Burger

Director

+1-212-908-0555

Fitch Inc.

33 Whitehall St.

New York, NY 10004

Secondary Analyst

Jim LeBuhn

Senior Director

+1-312-368-2059

Committee Chairperson

Eva Thein

Senior Director

+1-212-908-0674

Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: 
elizabeth.fogerty@fitchratings.com.

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been 
compensated for the provision of the ratings.

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CONDUCT' SECTION OF THIS SITE. NORMAL RATINGS Fitch Upgrades St. Peter's Health
Partners (NY) Bonds to 'BBB+'; Outlook Positive yes
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