The University of Vermont Health Network announced today that Standard &Poor’s (S&P), one of the major national bond rating services, has upgraded The University of Vermont Health Network’s bond rating from BBB+ with a positive outlook to an A- rating with a stable outlook. Additionally, Moody’s affirmed their A3 rating with a stable outlook. With this rating upgrade from S&P, the medical center and the network have now earned an A rating from all three major bond rating agencies, which also includes the Fitch rating agency.
Highlights
- Standard & Poor’s bond rating upgraded from BBB+ to A-
- UVM Health Network has an A rating from all three major rating agencies
- Future borrowing costs will become lower
The rating agencies made these announcements in anticipation of bonds being issued to partially finance the UVM Medical Center’s inpatient bed replacement building project, which is awaiting state approval.
S&P based its decision to upgrade on financial performance that has strengthened over time, the manner in which The University of Vermont Heath Network has maintained solid performance measures across its expanded network of affiliates, and the network’s long-term planning process. The rating agency also cited the UVM Medical Center’s standing as the low-cost provider in Vermont and the state's only academic medical center and safety net hospital for tertiary and quaternary services.
In its forecast, S&P noted that future debt is manageable and the network should maintain the A rating as S&P expects the current level of financial performance will continue through the remainder of fiscal 2015 and into future years.
“These bond ratings reflect the hard work of everyone involved in developing the UVM Health Network into a well-functioning integrated delivery system,” said John Brumsted, M.D., president and chief executive officer of the UVM Health Network and chief executive officer of the UVM Medical Center. “As we move forward with necessary capital projects to improve our system, the cost of funding those projects will be substantially reduced.”
The S&P announcement can be viewed at: http://www.dacbond.com:80/GetContent?id=0900bbc780154494&docname=rating_event_notice
Moody's assigns A3 to UVM Health Network's Ser. 2015B; Outlook stable
Moody's Investors Service assigns a A3 rating to University of Vermont Health Network's (UVMHN) proposed $100 million of Hospital Revenue Bonds Series 2015B to be issued through the Vermont Educational and Health Buildings Financing Agency. The bonds are expected to mature in 2045. At this time Moody's is affirming the A3 rating on parity bonds outstanding. The rating outlook is stable.
Assignment of the A3 rating reflects UVMHN's large size and clinical stature as the only academic medical center in Vermont and the North Country market of New York, the system's growth through acquisitions and affiliations with providers throughout the service area, and maintenance of good operating metrics that have allowed the organization to grow unrestricted cash over the last several years. These strengths are balanced by a planned period of higher capital spending over the next several years, and expected transition away from fee for service and greater emphasis on the system's different accountable care organizations.
The stable outlook reflects Moody's expectations that UVMHN will maintain stable and good levels of operating performance and manage capital expenditures in tandem with operating performance to maintain adequate liquidity metrics. UVMHN will have $350 million of rated debt.
WHAT COULD MAKE THE RATING GO UP
• Maintenance or improvement of current operating performance while improving liquidity metrics
• Continued profitable and accretive acquisitions that grow the organization's size
WHAT COULD MAKE THE RATING GO DOWN
• Significant cost overruns or delays on major construction projects
• Weakening of financial performance that limits balance sheet growth
• Additional debt absent commensurate cash flow growth
OBLIGOR PROFILE
University of Vermont Health Network was formerly known as Fletcher Allen Partners. The name was changed in 2014 to reflect the strategic affiliation with the University of Vermont. UVMHN operates the only academic medical center in Vermont and owns several community hospitals in Vermont and the north country of New York.
LEGAL SECURITY
Security is provided by a mortgage pledge on the UVMMC campus property. Rate covenant: 1.1 times; additional bonds require compliance with certain tests; debt service reserve fund.
USE OF PROCEEDS
Bond proceeds, along with a $87 million equity contribution, will be used to finance the inpatient bed project and pay the costs of issuance.
About the University of Vermont Medical Center
The University of Vermont Medical Center (formerly Fletcher Allen Health Care), is a 447 bed tertiary care regional referral center serving approximately 1 million residents in Vermont and northern New York. Together with our partners at the University of Vermont College of Medicine and the College of Nursing and Health Sciences, we are Vermont’s academic medical center.The University of Vermont Medical Center also serves as a community hospital for residents in Chittenden and Grand Isle counties.
The University of Vermont Medical Center is a member of The University of Vermont Health Network, a four-hospital system established to deliver high quality academic medicine to every community we serve. Our partners are:
- The University of Vermont Health Network – Central Vermont Medical Center
- The University of Vermont Health Network – Champlain Valley Physicians Hospital
- The University of Vermont Health Network – Elizabethtown Community Hospital
For more information visit www.UVMHealth.org/MedCenter
Sources: Burlington, UVMNH. New York, June 04, 2015 -- Moody's. 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.