|[April 03, 2014]
Fitch Affirms Jupiter Medical Center's (FL) Revs at 'BBB+'; Outlook Stable
CHICAGO --(Business Wire)--
Fitch Ratings has affirmed the 'BBB+' rating on the following Palm Beach
County Health Facilities Authority bonds issued on behalf of Jupiter
Medical Center (JMC):
--$50.7 million hospital revenue refunding bonds, series 2013A.
The Rating Outlook is Stable.
JMC has an additional $20.6 million in variable rate direct placement
debt which Fitch does not rate.
The bonds are supported by a pledge of revenues, a mortgage lien, and a
debt service reserve fund.
KEY RATING DRIVERS
STRONG SERVICE AREA: JMC's market position is solid with consistent
market share averaging 58% from 2010-2013 within its primary service
area. Further, market position for key specialties is substantially
stronger, and the service area boasts solid socioeconomic
characteristics and a good payor mix. Further, a competing CON
application was recently denied, and no further activity is expected,
further preserving JMC's market position.
ADEQUATE CASH FLOW: Despite missing its fiscal 2013 budget, JMC's
profitability remains sufficient to produce coverage which is in line
with Fitch's 'BBB' category medians. Through the four-month interim
period ended Jan. 31, 2014, JMC produced a 7.7% operating EBITDA margin
and 2.2x coverage by same, and is budgeting for a 7.9% operating EBITDA
margin for fiscal 2014.
STEADY LIQUIDITY: JMC maintained a steady cash position, with some
limited growth. Total unrestricted cash at Jan. 31, 2014 was $67
million, equating to 137.1 days cash on hand (DCOH) and 10x cushion
ratio. Liquidity has been supported by a conservative investment mix and
the strength of the JMC Foundation, which has provided very consistent
contributions averaging nearly $14 million annually since 2009. Fitch
expects JMC will maintain balance sheet metrics as it undertakes and
completes its $46 million pavilion project in early 2015.
MANAGEABLE DEBT LEVEL: Fitch views JMC's debt and leverage metrics as
moderate, due in part to the short life of JMC's existing debt. Debt to
capitalization was 38.3% at Jan. 31, 2014, and maximum annual debt
service (MADS) was 3.5% of EBITDA which are consistent with 'BBB'
category medians. JMC has no additional debt plans.
STABILIZED OPERATING PERFORMANCE: The 'BBB+' rating affirmation reflects
Fitch's expectation that JMC will further improve cash flow as a result
of its strategic investments and initiatives during fiscal 2014. There
is little room at the current rating for any further weakening of
operating profitability, or deterioration in coverage metrics.
JMC operates a 163-bed acute care hospital, 120-bed skilled nursing
facility, a physician group, a foundation and various other entities.
JMC is located in Jupiter, FL, approximately 20 miles north of West Palm
Beach. Excluding investent income and contributions, JMC produced $188
million in total operating revenues in fiscal 2013 (year ended Sept. 30).
Fitch uses consolidated financial statements in its analysis. The
Obligated Group (OG) comprises the medical center, the foundation, and
the pavilion, which represented substantially all total assets and 98.2%
of the total unrestricted revenue of the consolidated organization.
MODERATE DEBT LEVEL
Overall, JMC's debt burden remains manageable. At fiscal-year-end Sept.
30, 2013 JMC had approximately $86.7 million in long-term debt, with
MADS measured at $6.7 million. The debt is front-loaded, with MADS
occurring in 2020. The $20.6 million in variable rate debt is directly
placed with TD Bank, and a portion of this debt is likely to be retired
using capital contributions by 2020. No additional debt is currently
PAVILION PROJECT UNDERWAY
The $46 million DeGeorge Pavilion project is progressing on time and
within budget, with $22 million spent through February 2014 and interior
construction underway and expected completion in January 2015. Bond
proceeds of approximately $24 million (series 2013A and 2013C) have
funded the project thus far, and the foundation has consistently
provided the remaining capital support for the project via campaign
pledges and contributions. Aside from the pavilion project, routine
capital needs are not anticipated to exceed $9 million for fiscal 2015
Fitch expects JMC will continue to produce steady cash flow through
completion of its major capital project in early 2015. Fiscal 2013 was
impacted by several unexpected items, including a Medicare outlier
take-back as well as higher-than-budgeted reserves for various items.
These items are not anticipated to recur in fiscal 2014.
Through Jan. 31, 2014, JMC produced a 0.6% operating margin, improved
over the negative -0.6% operating margin in fiscal 2013. JMC is
budgeting for improved performance by fiscal year end, with a 1%
operating margin and 7.9% operating EBITDA margin. This will require
further improvement in JMC's profitability, and Fitch notes that
significant deviation from budget in fiscal 2014 could prompt negative
JMC covenants to disclose audited annual statements within 180 days, and
quarterly statements within 45 days for the first three quarters and 90
days for the fourth quarter, to the Municipal Securities Rulemaking
Board's EMMA system. Disclosure to Fitch has thus far been thorough,
with good access to management.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'U.S. Nonprofit Hospitals and Health Systems Rating Criteria' (May 20,
Applicable Criteria and Related Research:
U.S. Nonprofit Hospitals and Health Systems Rating Criteria
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