The series 2014A bonds are expected to be issued as fixed rate, and will be used to refund the existing series 1999 bonds, fund a debt service reserve, and pay costs of issuance. The series 2014A bonds are expected to price the week of
In addition, Fitch affirms the following NJEDA revenue bonds issued on behalf of UMH at 'BBB-':
The Rating Outlook is Stable.
The bonds are supported by a pledge of gross receipts of the obligated group (OG), a debt service reserve fund, and a mortgage lien on obligated group property.
KEY RATING DRIVERS
REFINANCING SAVINGS: The series 2014 refinancing will provide UMH with present value savings and lower debt service requirements. Total pro forma debt of
STEADY OPERATING PERFORMANCE: The 'BBB-' rating reflects UMH's very consistent and solid operating performance, coupled with minimal reliance on entrance fees or investment gains. UMH produced an 87.3% operating ratio and 18.2% net operating margin in unaudited fiscal 2014 (year ended
MODEST BUT IMPROVING LIQUIDITY: Unrestricted liquidity remains modest, equal to 356.1 days of cash on hand (DCOH), a 7.3x cushion ratio, and 59.1% cash-to-debt at June, 30, 2014, as compared to Fitch's respective 'BBB' category medians of 371.3, 6.9x, and 58.9%. Over the next two to three years UMH's capital plans are manageable, though Fitch notes some facilities have longer term capital needs in order to remain competitive in the market.
MARKET POSITION REMAINS SOLID: Despite operating in a competitive landscape, UMH's relationship with the Methodist churches across
SUSTAINED OPERATING PERFORMANCE: The rating includes Fitch's expectation that UMH will continue producing consistent operating performance and debt service coverage, which should result in further balance sheet strengthening and additional moderation in debt burden over the longer term. Upward rating consideration could occur with further moderation of debt metrics, coupled with demonstrable ability to sustain liquidity metrics at or above Fitch's 'BBB' median. Future capital needs could limit upward rating potential, particularly if scope/scale necessitates additional debt issuance.
UMH operates 10 senior housing, comprehensive personal care, memory support and skilled nursing facilities across the state of
The rating is based on obligated group (OG) financial results and operations. The obligated group consists of four owned and/or operated facilities with a total of 779 units. They are:
Total reported OG revenues were
In conjunction with the series 2014A and series 2014B debt issuance, UMH will refund its existing series 1999 and 1998 bonds and will then have approximately
Overall, UMH will sustain its conservative capital structure and manageable debt burden. In fiscal 2014 UMH generated steady revenue-only coverage of 2.0x debt service coverage, illustrating the marginal impact of net entrance fees, which added an additional 0.2x coverage.
Capital needs are manageable over the near term, estimated to be
STEADY OPERATING PROFITABILITY
UMH's consistent occupancy coupled with solid core expense controls continues to support stable profitability and incremental balance sheet improvement. For fiscal 2014 UMH produced an 87.3 operating ratio operating margin and 18.2% net operating margin, compared to Fitch's 'BBB' category medians of 97.2% and 9.9%, respectively. UMH is budgeting for steady profitability and for fiscal 2015.
Fitch does note that UMH's reliance on
UMH provides audited financials within 120 days and quarterly financials within 45 days to the EMMA system, which includes OG financial statements, covenant performance, and occupancy.
Additional information is available at 'www.fitchratings.com'
'Rating Guidelines for Nonprofit Continuing Care Retirement Communities' (
'Fitch Affirms United Methodist Homes (NJ) Revs at 'BBB-'; Outlook Stable' (
Rating Guidelines for Nonprofit Continuing Care Retirement Communities
Source: Fitch Ratings
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