North Mississippi Health Services 2010 Bond Rating Lowered To 'A+' From 'AA-' Following Criteria Application

CHICAGO (S&P Global Ratings) Feb. 5, 2019--S&P Global Ratings lowered its 
long-term rating on the Mississippi Hospital Equipment & Facility Authority's 
series 2010 bonds issued for North Mississippi Health Services (NMHS) to 'A+' 
from 'AA-'. We concurrently lowered our rating on the authority's series 
1997-1, 2001-1, 2003-1, and 2003-2 bonds issued for NMHS to 'A+/A-1' from 
'AA-/A-1+'. The outlook is stable. We based our 'A+' long-term rating 
component on our opinion of NMHS' credit strength. We based our 
'A-1'short-term rating component on the organization's self-liquidity.

The downgrade is based on the application of the revised U.S. And Canadian 
Not-For-Profit Acute Care Health Care Organizations criteria published March 
19, 2018. "We view NMHS' underlying credit profile as stable due to 
management's successful implementation of a well-developed action plan that 
meaningfully improved operations in fiscal 2018 after two years of operating 
challenges, as well as NMHS' excellent balance sheet and continued leading 
business position in its northern Mississippi market," said S&P Global Ratings 
credit analyst Elizabeth Bachelder.

The stable outlook reflects our expectation that NMHS will respond accordingly 
to operating headwinds over the next two years to achieve positive operating 
results and continue to generate healthy MADS coverage and increase its robust 
balance sheet. In addition, our outlook reflects NMHS' position as the 
northern Mississippi market leader, a position we believe has strengthened 
further with the addition of Gilmore-Amory, a 95-bed acute-care community 
hospital located about 30 miles southeast of the system flagship, which is 
estimated to become about 5% of the NMHS' total operating revenue base.

Over time, we could consider a higher rating if NMHS can return its operating 
margins to pre-2016 levels of about 3% and maintain its current balance sheet 
and enterprise strengths.  

While not likely given the recent rating action, we could consider a negative 
outlook or lower rating if NMHS' operating margins decline below break-even on 
a consistent basis or coverage declines below 3.5x for a sustained period. 
Material declines in market share could also stress the rating. 
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AC Investment Inc. currently does not act as an equities executing broker or route orders containing equities securities. If AC Invest’s business model were to change and it begins routing non-directed orders in NMS securities, it will comply with the disclosure requirement of Rule 606.

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