New York, December 05, 2022 — Moody’s Traders Service downgraded Westchester County Well being Care Company’s (WCHCC) (NY) and Charity Well being System’s (CHS) (NY) scores to Baa3 from Baa2. The outlook stays adverse. WCHCC had $773 million and CHS had $127 million of debt at fiscal yr finish 2021.
Please click on on this hyperlink http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM907950362 for the Checklist of Affected Credit score Scores. This record is an integral a part of this Press Launch and identifies every affected issuer.
RATINGS RATIONALE
The downgrade of WCHCC’s score to Baa3 displays low liquidity and cash-to-debt mixed with the anticipated value and stability sheet influence of a giant, however strategically vital, undertaking on the primary campus. Whereas the development of a affected person mattress tower will probably be important to satisfy rising demand and enhance efficiencies, the financing of the undertaking will seemingly require a large debt issuance and probably money, relying on the flexibility to safe grants and presents. Additionally, probably the most vital working problem to sustaining good margins on the flagship subsequent yr will probably be decreasing additional time and company workers to offset the price of a brand new union contract. Slower quantity restoration and an IT set up at Charity Well being System may delay enhancing its low cashflow margins. The score favorably incorporates an anticipated continuation of sturdy quantity progress seen over the past a number of years pushed by ongoing services investments to satisfy excessive demand, group efforts to lift model consciousness, and the system’s standing as the one tertiary and quaternary supplier between New York Metropolis and Albany. Quantity progress in excessive acuity service traces, together with a number of supplemental authorities funding sources, will assist maintain good margins on the flagship. Additionally, the opening of a brand new hospital this month is predicted to reverse cashflow losses at HealthAlliance. Lastly, the system’s essentiality and public mannequin and governance will proceed to assist it safe working and/or capital grants, together with probably for the mattress tower.
The downgrade of CHS’s score to Baa3 relies on WCHCC’s authorized assure to pay debt service on CHS’s Collection 2015 bonds, if CHS is unable. WCHCC supplies an irrevocable and unconditional assure masking full and well timed cost of all scheduled funds of principal and curiosity on CHS’s bonds.
RATING OUTLOOK
The adverse outlook displays the potential for even weaker liquidity and cash-to-debt if the system is unable to safe grants and/or presents to cowl fairness contributions wanted for the undertaking or if undertaking prices exceed the present estimate given the inflationary atmosphere. The outlook additionally displays dangers that the system will fall wanting cashflow objectives if the discount of short-term labor throughout the system is slower than anticipated and/or the ramp up of volumes at HealthAlliance and the CHS hospitals is extended.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
– Materials progress in liquidity
– Measurable enchancment in working and stability sheet leverage metrics
– Sustained greater working cashflow margins for the consolidated system together with CHS
– Demonstrated monetary help from Westchester County
– For Charity Well being System, improve of Westchester County Well being Care Corp.
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
– Decrease than anticipated days money available or cash-to-debt
– Larger undertaking value and fairness contribution than present estimate
– Incapacity to meaningfully enhance margins at HealthAlliance and Charity in 2023 in addition to largely maintain margins at WMC
– Significant enhance in pension contributions
– For Charity Well being System, downgrade of Westchester County Well being Care Corp.
LEGAL SECURITY
The obligated group consists of Westchester County Well being Care Company, which incorporates the Westchester Medical Middle Valhalla and MidHudson campuses. The obligated group doesn’t embody HealthAlliance, CHS and sure different subsidiaries of WCHCC. The bonds are secured by a pledge of gross receipts of the obligated group and mortgages of sure property. The mortgages encompass leasehold pursuits within the Valhalla and MidHudson campuses.
WCHCC supplies an irrevocable and unconditional warranty masking full and well timed cost of all scheduled funds of principal and curiosity on CHS’s bonds. The assure is evidenced via a supplemental indenture to WCHCC’s grasp belief indenture, placing CHS’s bonds on parity with WCHCC’s different MTI obligations. Whereas the assure doesn’t prolong to accelerated bonds, the indenture doesn’t permit for acceleration of principal and curiosity on CHS’s bonds. Moreover, CHS’s bonds should not topic to necessary redemptions. CHS’s bonds are secured by gross receivables of the obligated group, which incorporates the hospitals solely and excludes physician-related entities.
PROFILE
The Westchester County Well being Care Company (WCHCC) is a New York Public Profit Company. The principle campus is situated in suburban Westchester County, New York and is leased from Westchester County. The foremost services with 887 beds embody the Primary Hospital, Stage 1 Trauma Middle, Behavioral Well being Middle, 260,000 square-foot Ambulatory Care Pavilion, and Maria Fareri Kids’s Hospital, all on the Valhalla Campus, and the MidHudson Regional Hospital, in Poughkeepsie, NY. Efficient March 30, 2016 WCHCC entered into an affiliation settlement with HealthAlliance (165 staffed beds) and WMC-Ulster, wherein WMC-Ulster turned the only real member of HealthAlliance.
WCHCC was created in 1998 when the County transferred accountability for the medical middle to WCHCC and the hospital operation ceased to exist as a County division. WCHCC leases from the County roughly 87 acres of actual property, upon which the well being care services are situated. Beneath the governing lease settlement, WCHCC granted a lien to the County on all property owned by the WCHCC.
Efficient Might 19, 2015, via a newly created subsidiary, WCHCC turned a member of Charity Well being System (CHS) with 60% financial curiosity. Bon Secours Mercy Well being, Inc. retained a 40% financial curiosity in CHS. CHS is comprised of Good Samaritan Hospital in Suffern, N.Y., Bon Secours Group Hospital in Port Jervis, and St. Anthony Group Hospital in Warwick (complete 361 staffed beds), in addition to a long run care facility and an assisted dwelling facility and numerous employed physicians.
Our evaluation absolutely incorporates CHS into WCHCC’s credit score profile, given WCHCC’s administration, efficient management, strategic and monetary integration, and assure of CHS’s debt service. References to “Consolidated system” or “system” mirror mixed WCHCC and CHS.
METHODOLOGY
The principal methodology utilized in score Westchester County Healthcare Company, NY was Not-For-Revenue Healthcare printed in December 2018 and out there at https://scores.moodys.com/api/rmc-documents/70886. The principal methodology utilized in score Charity Well being System, NY was Ensures, Letters of Credit score and Different Types of Credit score Substitution Methodology printed in July 2022 and out there at https://scores.moodys.com/api/rmc-documents/386295. Alternatively, please see the Ranking Methodologies web page on https://scores.moodys.com for a replica of those methodologies.
REGULATORY DISCLOSURES
The Checklist of Affected Credit score Scores introduced listed here are all solicited credit score scores. For extra info, please check with Moody’s Coverage for Designating and Assigning Unsolicited Credit score Scores out there on its web site https://scores.moodys.com. Moreover, the Checklist of Affected Credit score Scores consists of extra disclosures that adjust with regard to a few of the scores. Please click on on this hyperlink http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM907950362 for the Checklist of Affected Credit score Scores. This record is an integral a part of this Press Launch and supplies, for every of the credit score scores lined, Moody’s disclosures on the next objects:
– Ranking Solicitation
– Issuer Participation
– Participation: Entry to Administration
– Participation: Entry to Inside Paperwork
– Endorsement
For additional specification of Moody’s key score assumptions and sensitivity evaluation, see the sections Methodology Assumptions and Sensitivity to Assumptions within the disclosure type. Moody’s Ranking Symbols and Definitions may be discovered on https://scores.moodys.com/rating-definitions.
For scores issued on a program, sequence, class/class of debt or safety this announcement supplies sure regulatory disclosures in relation to every score of a subsequently issued bond or word of the identical sequence, class/class of debt, safety or pursuant to a program for which the scores are derived completely from current scores in accordance with Moody’s score practices. For scores issued on a help supplier, this announcement supplies sure regulatory disclosures in relation to the credit standing motion on the help supplier and in relation to every explicit credit standing motion for securities that derive their credit score scores from the help supplier’s credit standing. For provisional scores, this announcement supplies sure regulatory disclosures in relation to the provisional score assigned, and in relation to a definitive score that could be assigned subsequent to the ultimate issuance of the debt, in every case the place the transaction construction and phrases haven’t modified previous to the task of the definitive score in a way that will have affected the score. For additional info please see the issuer/deal web page for the respective issuer on https://scores.moodys.com.
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Regulatory disclosures contained on this press launch apply to the credit standing and, if relevant, the associated score outlook or score overview.
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Please see https://scores.moodys.com for any updates on adjustments to the lead score analyst and to the Moody’s authorized entity that has issued the score.
Please see the issuer/deal web page on https://scores.moodys.com for extra regulatory disclosures for every credit standing.
Lisa Martin
Lead Analyst
PF Healthcare
Moody’s Traders Service, Inc.
7 World Commerce Middle
250 Greenwich Avenue
New York 10007
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Consumer Service: 1 212 553 1653
Susan Fitzgerald
Further Contact
Larger Training
JOURNALISTS: 1 212 553 0376
Consumer Service: 1 212 553 1653
Releasing Workplace:
Moody’s Traders Service, Inc.
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U.S.A
JOURNALISTS: 1 212 553 0376
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