The Rating Outlook is Stable.
The bonds are secured by a pledge of gross revenue, a mortgage on the primary facility and a fully funded debt service reserve fund.
KEY RATING DRIVERS:
SOLID OPERATING PROFITABILITY: Mission's operating profitability remains solid with operating EBITDA averaging 11.8% since fiscal 2010 and equaling 10.5% in fiscal 2013 and 10% in the nine-month interim period ending
ELEVATED DEBT BURDEN: The debt burden remains elevated with maximum annual debt service (MADS) equal to 3.3% of operating revenue in fiscal 2013 relative to Fitch's 'AA' category median of 2.6%. MADS coverage by EBITDA of 5.7x in fiscal 2013 was strong, but was bolstered by realized investment gains and recognized gains related to two acquisitions. MADS coverage by operating EBITDA of 3.2x in fiscal 2013 was light for the 'AA-' rating category.
SOLID LIQUIDITY METRICS: Unrestricted liquidity improved since Fitch's last review, primarily due to Mission's series 2012 taxable debt issuance, and liquidity metrics are consistent with Fitch's 'AA' category medians. Liquidity metrics are expected to compress as Mission draws down bond proceeds in support of its campus consolidation project.
STRONG MARKET POSITION: Mission maintains a leading 45% market share in its 18-county total service area. Market share is much stronger at 93.5% in its primary service area (PSA); however, the PSA only accounts for approximately 50% of Mission's admissions.
SIGNIFICANT CAPITAL PROJECT: The Mission Redesign Plan includes the consolidation of
SUFFICIENT OPERATING CASH FLOW: Fitch expects that Mission will maintain operating cash flow consistent with its current rating to fund its campus consolidation project and that liquidity levels will remain in line with management's forecast. A sustained weakening in cash flow or liquidity, or the issuance of additional debt could result in downward rating pressure.
SOLID OPERATING PROFITABILITY
Operating profitability remains solid with operating EBITDA margin equal to 10.5% in fiscal 2013 and 10% in the interim period. Operating EBITDA margin compressed slightly from 13% in fiscal 2012 but the compression was expected and primarily due to increased costs associated with Mission's campus consolidation project. EBITDA margin equaled a strong 17.4% in fiscal 2013 but was aided by
Mission's operating profitability has been significantly aided by supplemental government funding from sources including
ELEVATED DEBT BURDEN
Despite the solid operating profitability, MADS coverage by operating EBITDA is light for the rating category due to Mission's elevated debt burden. MADS coverage by operating EBITDA equaled 3.2x in fiscal 2013 and 2.7x in the interim period, comparing unfavorably to Fitch's 'AA' category median of 4.4x. Strong non-operating income produced solid MADS coverage by EBITDA of 5.7x in fiscal 2013 and 6.0x in the interim period. Excluding the non-operating income associated with the acquisitions, MADS coverage by EBITDA would have equaled a more modest 4.4x.
SOLID LIQUIDITY METRICS
Unrestricted liquidity increased 35.2% since
STRONG MARKET POSITION
Fitch views Mission's strong market position in its service area as a key credit strength which contributes to Mission's operating stability. Mission's leading market share in its PSA increased to 93.5% in fiscal 2013 from 91.3% in fiscal 2010 while its total service area market share increased to 45% from 42.8%. Total service area market share increased despite consolidation in the service area, primarily due to acquisitions of several small community hospitals by Duke LifePoint. The increased consolidation could lead to increased competition.
SIGNIFICANT CAPITAL PROJECT
Mission is currently in the process of executing a campus consolidation project under which the system will consolidate the operations of
The project is expected to be funded by the series 2012 bond proceeds, and operating cash flows. Mission may issue an additional
Additional information is available at 'www.fitchratings.com'.
--'U.S. Nonprofit Hospitals and Health Systems Rating Criteria',
U.S. Nonprofit Hospitals and Health Systems Rating Criteria
Source: Fitch Ratings
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