The Rating Outlook is revised to Stable from Positive.
The bonds are secured by a pledge of gross revenues of the obligated group, and a first-priority mortgage on certain property.
KEY RATING DRIVERS
BALANCE SHEET GROWTH: The rating upgrade to 'BBB' is prompted by PRHC's continued improvement in liquidity metrics, which have grown consistently over the past five years. As of
CONSISTENT HEALTHY CASH FLOW: PRHC's critical access hospital (CAH) designation provides beneficial
LEADING MARKET POSITION: By virtue of its CAH designation PRHC remains the market leader in
MODERATING DEBT BURDEN: The rating upgrade is additionally supported by PRHC's declining debt burden and modest ongoing capital needs. While maximum annual debt service (MADS) as a percent of revenue remains somewhat elevated at 4.5%, debt-to-EBITDA was 3.7x in 2013 and improved significantly from 6.4x in 2010. No additional debt is planned, and future capital needs are manageable between
SMALL REVENUE BASE: PRHC's revenue base of
SUSTAINED BALANCE SHEET STRENGTH: Fitch expects PRHC to sustain an ample level of liquidity for its rating level, which is required as a cushion against the risks associated with its modest revenue base and debt level. Sustaining liquidity metrics in excess of Fitch's 'BBB' category metrics will require consistent cash flow strength to fund modest capital needs and provide ongoing debt moderation.
Balance Sheet Growth
The upgrade to 'BBB' from 'BBB-'is driven primarily by ongoing growth in PRMC's liquidity. Unrestricted liquidity has more than doubled since 2008, from
PRHC's capital needs are modest going forward, between
Consistent Healthy Cash Flow
For 2013, PRHC produced a 4.1% operating and 14% operating EBITDA margins, and is budgeting for stable operating performance in 2014, targeting 3.6% operating and 14% operating EBITDA margins. Fitch anticipates that PRHC will achieve these budget targets. The three-month interim performance is above budget at 3.7% operating and 14.3% operating EBITDA margins, which is noteworthy, as first-quarter performance has been historically light. PRHC continues to investigate opportunities to cut costs and improve efficiencies.
Leading Market Position
The rating incorporates PRHC's CAH designation, which provides enhanced reimbursement for both
Solid economic factors are born out in PRHC's good payor mix with relatively small exposure to
Moderating Debt Burden
Fiscal 2015 will be PRHC's first principal payment on the outstanding debt totaling approximately
Small Revenue Base
The primary credit concern is PRHC's modest revenue base for the 'BBB' rating category, which limits its overall financial flexibility in the face of adverse events, and highlights the need for strong balance sheet flexibility. Fitch also notes that the long-term viability of the CAH program is uncertain, and that any changes to that program could have a material impact on PRHC's credit profile and rating. Management recognizes the risk associated with the reduction in this supplemental funding and is currently analyzing how to offset any negative impact on profitability.
PRHC covenants to provide annual and quarterly disclosure to the Municipal Securities Rulemaking Boards EMMA system, consisting of a management discussion and analysis, balance sheet, income statement, statement of cash flows, and utilization statistics.
Additional information is available at 'www.fitchratings.com'
'Revenue-Supported Rating Criteria', dated
'Nonprofit Hospitals and Health Systems Rating Criteria', dated
Revenue-Supported Rating Criteria
U.S. Nonprofit Hospitals and Health Systems Rating Criteria
Source: Fitch Ratings
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