Fitch Affirms Altru Health System’s (ND) Revs at ‘A-‘; Stable Outlook
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Fitch Ratings has affirmed the rating on the following bonds issued through the
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The Rating Outlook is Stable
SECURITY
The bonds are secured by gross receivables of the obligated group.
KEY RATING DRIVERS
DOMINANT MARKET SHARE: Altru has a dominant market position in its primary service area (PSA) with an 81 percent share. The next closest competitor,
OPERATIONAL DECLINE: In fiscal 2013 (
MIXED FINANCIAL PROFILE: Liquidity and debt service coverage continue to be relatively weak for the rating category. Additionally, Fitch believes the organization is at its debt capacity for the rating level given the recent operational pressures. Management has tabled its plan for additional debt (
FAVORABLE SERVICE AREA CHARACTERISTICS: Located in
CONSERVATIVE DEBT PROFILE: Altru has a conservative debt profile which is approximately 95 percent fixed-rate and 5 percent variable- rate. Additionally, the system has no outstanding swaps.
RATING SENSITIVITIES
OPERATIONAL IMPROVEMENT NEEDED: Management has implemented a financial turnaround plan, which is expected to yield approximately
CREDIT PROFILE
Located in
OPERATING PROFITABILITY DECLINE
In fiscal 2013 Altru recorded its first operating loss (
Since realizing the operating loss, management has begun to implement various expense reductions, expected to produce
Management is committed to meeting its budget and has expressed that further expenses will be cut if revenue growth does not meet expectations. Fitch would view Altru's failure to reach its budgeted 2014 goal negatively. With an already limited financial profile for the 'A-' rating level, Fitch believes Altru has very little financial flexibility to absorb any further adverse events in fiscal 2014.
LOW DEBT SERVICE COVERAGE AND LIQUIDITY
Over the past five fiscal years Altru has averaged maximum annual debt service (MADS) coverage of 2.6x, which is below Fitch's median of 3.8x. Additionally, Fitch believes the system is at its debt capacity for the rating level, which is highlighted by MADS (
At
Any material weakening in balance sheet cushion or an increase in leverage would be viewed unfavorably.
FAVORABLE SERVICE AREA CHARACTERISTICS
Located in
CONSERVATIVE DEBT PROFILE
Altru's debt profile is approximately 95 percent fixed rate and 5 percent variable rate, which Fitch views as conservative and appropriate for the rating level. The system has no outstanding swaps. Altru has one series of outstanding variable rate demand bonds (
DISCLOSURE
Altru covenants to disclose annual audited financial statements and quarterly information to the MSRB's EMMA system.
More information:
fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=498412
fitchratings.com/gws/en/disclosure/solicitation?pr_id=826619
fitchratings.com/understandingcreditratings
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