Fitch Ratings has assigned an "AA" rating to the expected issuance of $209.6 million of series 2014D revenue bonds on behalf of Renton, Wash.-based Providence Health & Services.
The series 2014D bonds are expected to issued through negotiated sale the week of Oct. 20. The proceeds of the bonds will be used to refund the outstanding debt of 236-bed Kadlec Regional Medical Center in Richland, Wash. In June, Kadlec and PHS signed a definitive agreement to affiliate.
The rating assignment was supported by a number of factors, including the hospital operator's strong market position. PHS owns or leases 34 hospitals in Washington, Oregon, Alaska, Montana and California, with many of its facilities having substantial market share positions.
The health system also faces some challenges, which were considered for the rating assignment, such as weak profitability in 2013. PHS reported $37.6 million in operating income in 2013, down from $204 million in 2012. As a result, the hospital operator's operating margin fell from 1.9 percent in 2012 to 0.3 percent in 2013. However, through June 30, its operating profitability had improved.
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