NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded to 'BBB' from 'BBB-' and simultaneously withdrawn the rating on the following bonds issued by Norman Regional Hospital Authority (Norman):
--$80 million hospital revenue bonds, series 2007;
--$67 million
hospital revenue bonds, series 2005;
--$12 million hospital revenue
select auction variable rate securities, series 1996B.
SECURITY
The bonds are secured by a pledge of the Norman's gross
revenues and trustee-held assets.
KEY RATING DRIVERS
RATING UPGRADE: The upgrade to 'BBB' from 'BBB-' reflects Norman's improved operating profitability resulting in liquidity growth and debt moderation over the past several years. Last year, Fitch revised Norman's Outlook to Positive from Stable with the expectation that an upgrade would occur if financial performance and balance sheet position were sustained.
IMPROVED OPERATING RESULTS: After steady profitability during fiscal 2013 and 2014, Norman posted improved operating results during the last two fiscal years. For the unaudited fiscal year 2016 (June 30 year-end), Norman generated a 5.6% operating margin and 13% operating EBITDA margin, which are both favorable to Fitch's 'BBB' category medians of 0.6% and 7.7%, respectively. The authority's improved operating performance is attributed to good outpatient volume growth, higher acuity, and continued cost reduction efforts.
STRENGTHENED LIQUIDITY: Liquidity has grown over the past several years due to better earnings, moderate capital spending, and the receipt of insurance proceeds from a tornado that destroyed Norman's Moore Medical Center (but was subsequently rebuilt as an outpatient facility). At the end of fiscal 2016, unaudited unrestricted cash and investments of $182 million amounted to 196 days cash on hand or 93.2% of debt. Both of these metrics exceed Fitch's 'BBB' category medians of 161.5 days cash on hand and 89.5% cash to debt.
MODERATING DEBT BURDEN: Norman's debt burden continues to abate but is still moderately high as indicated by maximum annual debt service (MADS) equating to 4.7% of unaudited fiscal 2016 revenues compared to the 'BBB' category median of 3.6%. However, Norman's improved cash flow has resulted in good debt service coverage for the rating level at 3.0x during unaudited fiscal 2016.
RATING WITHDRAWN: Fitch has withdrawn the rating as the authority has chosen to cease participating in the rating process. Therefore, Fitch will no longer have sufficient information to maintain the ratings. Accordingly, Fitch will no longer provide rating or analytical coverage for Norman.
RATING SENSITIVITIES
Rating Sensitivities are not applicable as the rating has been withdrawn.
CREDIT PROFILE
The authority is a public trust that was created by the city of Norman to operate Norman Regional Hospital (NRH), a 337 licensed bed acute care hospital. The system is currently composed of NRH and HealthPlex Hospital, a 168 bed hospital located four miles from the main campus that opened in October 2009, as well an outpatient facility located at the former Moore Medical Center about 10 miles north of the city of Norman. Total operating revenue in unaudited fiscal 2016 was $380 million.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria
Revenue-Supported Rating Criteria (pub. 16 Jun
2014)
https://www.fitchratings.com/site/re/750012
U.S.
Nonprofit Hospitals and Health Systems Rating Criteria (pub. 09 Jun 2015)
https://www.fitchratings.com/site/re/866807
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1011413
Solicitation
Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1011413
Endorsement
Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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