Fitch Ratings has assigned a "BBB" rating to approximately $148.4 million of series 2014A revenue and refunding bonds issued on behalf of Chattanooga, Tenn.-based Erlanger Health System.
The rating assignment was based on a number of factors, including the results of the financial and operational initiatives implemented since Erlanger's CEO took office in 2013. Due to the initiatives, Erlanger produced a solid 3.3 percent operating margin and a 9.1 percent operating EBITDA margin for fiscal year 2014.
The rating assignment was also supported by the system's manageable debt burden and the local and state legislative support it has gained as the area's public hospital and safety net provider.
Going forward, Fitch predicts Erlanger will need to sustain current levels of operating cash flow to produce coverage in line with the 'BBB' category median and to offset a light balance sheet.