NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned an implied general revenue bond rating of 'A-' to Milwaukee Catholic Home (MCH), WI.
The Rating Outlook is Stable.
MCH has outstanding two series of privately placed bonds totaling $15.5 million at Sept. 30, 2013, which Fitch does not rate.
KEY RATING DRIVERS
SOLID PROFITABILITY: Operating ratio and net operating margin have been consistently good, albeit the bottom line has seen volatility due to fluctuations in investment returns. Profitability metrics strengthened through the nine-month interim period ended Sept. 30, 2013 given recovery in occupancy rates across the continuum of care.
STRONG REVENUE-ONLY COVERAGE: Supported by solid profitability, revenue-only coverage of maximum annual debt service (MADS) was robust at 1.8x in the fiscal year ended Dec. 31, 2012 and 2.2x in the nine-month interim period compared to the median of 1.2x. This strength reflects MCH's effective management of its skilled nursing facility (SNF) supported by a close relationship with a nearby hospital.
SOUND LIQUIDITY: MCH benefits from its stable liquidity position, with unrestricted cash and investments of $21.5 million as of Sep. 30, 2013 producing liquidity metrics that are at or above Fitch's 'A' category medians.
INCREASED DEBT BURDEN: In 2012, MCH issued $5.3 million of series 2012 direct purchase bonds to fund construction projects, and the full amount will be drawn by February 2014. The increase in debt burden is supported by a solid balance sheet and revenue-only MADS coverage.
EXPECTED INCREASE IN COMPETITION: In 2012, Life Care Services (LCS) began managing two communities previously sponsored by Milwaukee Protestant Home. As LCS ramps up its marketing and management efforts at the two communities, competitive pressure will likely grow. MCH is actively planning to update its facilities and improve service offerings.
RATING SENSITIVITIES
STABLE FINANCIAL PERFORMANCE EXPECTED: Given MCH's limited reliance on entrance fees and increased debt burden, strong operating ratios and revenue-only MADS coverage in excess of the median are essential.
NO ADDITIONAL DEBT: Fitch believes there is little capacity for additional debt at the current rating level. MCH does not have any new debt plans for the next three years.
CREDIT PROFILE
MCH is a type-C continuing care retirement community (CCRC) facility located just north of downtown Milwaukee, WI. The community includes 119 ILUs, 24 assisted living units, and a 119 bed SNF. In fiscal 2012, MCH generated $16.8 million in total operating revenue.
For more information, please refer to Fitch's press release titled 'Fitch Affirms Milwaukee Catholic Home (WI) Revs at 'A-'; Outlook Stable' which is available at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Revenue-Supported Rating Criteria' (dated June 3, 2013);
--'Rating Guidelines for Nonprofit Continuing Care Retirement Communities' (dated July 12, 2012).
Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=709499
Rating Guidelines for Nonprofit Continuing Care Retirement Communities
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=40171
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=812535
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