Fitch Rates Northern Berkshire Health System, MA Series 2004 Bonds 'BB+'.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has assigned a 'BB+' rating to the approximately $25 million Massachusetts Health and Educational Facilities Authority, Northern Berkshire Health Systems, revenue bonds, series 2004. In addition, Fitch has affirmed the 'BB+' rating on the outstanding $9.6 million Massachusetts Health and Educational Facilities Authority Revenue Bonds, North Adams North Adams, city (1990 pop. 16,797), Berkshire co., NW Mass., in the Berkshire Hills, on the Hoosic River near the Vt. border; settled c.1737, set off from Adams and inc. 1878. It is located in a summer resort and winter ski area. Regional Hospital Issue, 1996 series C. The Rating Outlook is Stable. Bond proceeds will be used to fund various hospital renovation and expansion projects, restructure approximately $6 million of the outstanding bonds, fund a debt service reserve, fund capitalized interest Capitalized interest Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing. , and pay costs of issuance. The bonds are expected to price the week of August 30 through negotiation by Ziegler Capital Markets Group. The 'BB+' rating is based on Northern Berkshire Health Systems' (NBHS NBHS New Braunfels High School (New Braunfels, TX) NBHS North Bromsgrove High School (UK) NBHS North Baltimore High School (North Baltimore, Ohio) ) dominant market position, successful recruitment of new physicians, increasing outpatient volume, and demographics of the service area. NBHS's primary credit strength continues to be its dominant market position. With the hospital located in a rural, geographically isolated area, market share has remained above 70% over the past five years. The nearest competitor, Berkshire Medical Center (rated 'BBB+' by Fitch), is approximately 25 miles away and had only 16.7% market share. NBHS has been successful in recruiting new physicians with a net increase of 11 physicians over the last three years. Fitch views this favorably especially due to the recent decline in inpatient volume and believes the continued ability to attract physicians will be a key driver in the return to profitability for the organization. Although inpatient volume has decreased, outpatient volume has increased. Fitch expects outpatient volume to continue to increase with the expansion of several services funded by this bond issuance. The service area has a large percentage of the elderly population with 19% of the primary service area over 65 years of age, which is viewed favorably due to the higher utilization of services by this age group. In addition, a senior living facility and nursing home were acquired by the system in 1999 due to the demographics of the service area, which should further aid revenue growth as occupancy grows. Credit concerns include NBHS's weak operating performance, declining liquidity, and future capital needs. NBHS's financial profile is weak with a history of large operating losses and declining liquidity position. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. has slightly improved to negative 2.8% operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: through the six months ended March 31, 2004 from negative 7.2% in fiscal 2001. Operating losses have been due to difficult labor relations with the union, declining inpatient volume, and losses at the senior living facilities. Bottom line losses have led to a decline in liquidity with 77.9 days cash on hand and 38.4% cash to debt at March 31, 2004 compared to 97.3 days cash on hand and 42.6% cash to debt at fiscal year-end Fiscal Year-End The completion of a one-year, or 12-month, accounting period. Notes: The reason that a company's fiscal year often differs from the calendar year and does not close on Dec 31, is due to the nature of company's needs. 2001. Due to NBHS's weak financial position, capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. has been limited and totaled 44% of depreciation expense in fiscal 2003. However, historic capital investment in the areas of information technology and equipment has been greater than in the physical building. Fitch toured the facility and believes the current project is significantly needed due to the age of the plant. Future capital spending needs will place pressure on NBHS's financial position if profitability does not improve. The system has begun a capital campaign with the goal of raising approximately $12 million. Total pledges are approximately $9.0 million thus far, which Fitch views favorably. NBHS projects to attain operating profitability in fiscal 2005 and expects to achieve positive operating results in the near term. Fitch believes the System's forecast is reasonable due to the recent investment in plant, good physician recruitment and solid market position. Northern Berkshire Health Systems is located in North Adams, MA with North Adams Regional Hospital (66 staffed bed hospital), Sweetwood Continuing Care continuing care a professional convention that a veterinarian who is treating an animal is obliged to continue treating that case unless an arrangement is made with its custodian to transfer the care to another practitioner or to a specialist. Retirement Community (70 independent living units), and Sweet Brook Care Centers (184 bed skilled nursing facility skilled nursing facility n. Abbr. SNF An establishment that houses chronically ill, usually elderly patients, and provides long-term nursing care, rehabilitation, and other services. ) as the main revenue generating components. With this bond issuance, a new obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. group will be formed that will comprise 100% of total revenue and 100% of total assets of the health system. Fitch's rating on the 1996 bonds was historically based on the hospital only. Total revenue of the health system was $64 million in fiscal 2003. NBHS covenants to provide quarterly disclosure to bondholders, which Fitch views favorably. Disclosure to Fitch has been good with the receipt of timely, comprehensive quarterly information. |
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