Spartanburg Regional Health Services District, SC Series 2020 Hospital Revenue Bonds Rated 'A'

COLUMBIA (S&P Global Ratings) March 24, 2020--S&P Global Ratings has assigned its 'A' long-term rating to Spartanburg Regional Health Services District, S.C.'s approximately $125 million series 2020 taxable and tax-exempt hospital revenue bonds. At the same time, we affirmed our 'A' rating on the district's existing revenue bonds. The outlook is negative.
The district does business as Spartanburg Regional Health System (SRHS). SRHS will use the series 2020 bonds to refinance its existing line of credit ($109.3 million outstanding as of fiscal 2019), which was used to finance the purchase of Mary Black Health System (MBHS) as well as fund some additional capital expenditures.
"The rating reflects our view of SRHS' very strong enterprise profile with an excellent competitive position, moderate economic fundamentals, and experienced management team," said S&P Global Ratings credit analyst Luke Gildner.
Market share grew significantly in fiscal 2019 following the acquisition of MBHS, which has allowed SRHS' to achieve sole community hospital status effective March 2019. Our view of the organization's strong financial profile is supported by its financial performance, which has remained healthy through the integration of the newly acquired hospitals. The rating also incorporates a negative adjustment based on SRHS' highly leveraged balance sheet and slim unrestricted reserves when compared to other similarly rated peers.


The negative outlook continues to reflect our view that certain key financial resource ratios are currently in line with a lower rating. We understand management anticipates growing these ratios over the near term due to significant growth in budgeted operating margins over the next few years. We believe maintenance of the current rating depends on SRHS' ability to achieve this higher level of operating margins, translating to meaningful growth in financial resources.
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