Moody's Investors Service has assigned a "Baa1" initial rating to Suffern, N.Y.-based Bon Secours Charity Health System's proposed $122 million of series 2015 taxable fixed rate bonds.
The bonds are expected to mature in 2045, structured with bullet payments in 2025, 2035 and 2045, according to Moody's. The rating is contingent on the conclusion of BSCHS' affiliation with Westchester Medical Center in Valhalla, N.Y.
Here are four things to know about the rating assignment and related factors.
1. The rating assignment was based on a number of factors, WMC's legal guarantee to pay debt service on the series 2015 bonds, if BSCHS is unable. WMC, which is expected to affiliate with BSCHS, effective May 19, is providing an irrevocable and unconditional guarantee covering full and timely payment of all scheduled payments of principal and interest on BSCHS bonds.
2. Moody's said WMC's "Baa1" rating "reflects the materially dilutive effect of WMC's affiliation with (BS)CHS, with reduced relative liquidity and increased leverage, as well as depressed margins ahead of a turnaround."
3. WMC's challenges are balanced by its strong market position as a large provider of high acuity services, track record of relatively stable margins, proven ability to turnaround operations at a recently acquired bankrupt hospital, minimal debt structure risks and long-standing affiliation with Westchester County.
4. Moody's expects "that WMC will improve efficiencies and revenue cycle to significantly reduce losses at (BS)CHS within two years and restore overall system margins, based on management's historical track record of executing improvement
initiatives."
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