Kendal At Oberlin, OH Revenue Bond Rating Raised To 'A' On Ongoing Operating Surpluses, Solid Financial Profile

CENTENNIAL (S&P Global Ratings) April 18, 2019--S&P Global Ratings raised its long-term rating to 'A' from 'A-' on the Lorain County Port Authority, Ohio's series 2013A health care facilities revenue bonds, issued for Kendal at Oberlin (Kendal), a continuing care retirement community (Life Plan Community). The outlook is stable.
"The raised rating reflects our view of Kendal at Oberlin's consistent operating performance and solid financial profile, including a sound balance sheet, particularly favorable liquidity and financial flexibility," said S&P Global Ratings credit analyst Wendy Towber. "Kendal's ability to generate annual operating surpluses that meet or exceed budget is a credit strength in our view as it both reduces the reliance on non-operating income, which can be inconsistent and demonstrates strong business practices of monitoring performance against budgeted goals throughout the year," Ms. Towber added.
The rating further reflects our opinion of Kendal at Oberlin's:
  • Solid liquidity, with approximately 915 days' cash on hand as of the unaudited fiscal year ended Dec. 31, 2018;
  • Solid business position, reflected by consistently high independent living unit occupancy; and
  • Seasoned management team, supported by an experienced and well-branded, non-obligated sponsor.
Partly offsetting the above strengths, in our view, are Kendal at Oberlin's:
  • Relatively small, albeit steadily growing (approximately $20.3 million) annual total operating revenue base, which leaves it vulnerable to shifts in operations or finances;
  • Budgeted use of unrestricted reserves which, while modest, could decrease days' cash on hand to about 866 from the prior year high of near 1,000, although we still consider this metric solid for the rating; and
  • Modest decline of adjusted maximum annual debt service coverage to 2.4x for unaudited fiscal year 2018, compared to 2.8x in the prior year although coverage remains sufficient for the rating.
Kendal at Oberlin operates 223 independent living units (ILUs), a 12-bed nursing facility, and 67 personal care units on a single site. Kendal at Oberlin is predominantly a life plan (Type A) community and is an affiliate of The Kendal Corp., which offers affiliated services to Kendal at Oberlin and 13 other affiliates in the U.S. Kendal at Oberlin is located in Oberlin, Ohio, less than one mile from Oberlin College and 35 miles west of Cleveland.
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