SMH gets bond rating upgrade, may save millions
David Gulliver - posted 10 am Tuesday, July 28
A financial firm upgraded Sarasota Memorial Hospital’s bond rating, a change that means the hospital may save millions of dollars in interest on the money it will borrow to build its planned bed tower.
Fitch Ratings gave the hospital system an AA- rating, up from the A+ rating it awarded in April 2008. Investors use credit ratings to assess the relative safety of bond issuers, like the hospital, local governments or corporations. Generally, the better the credit rating, the less of an interest rate the bond issuer will have to pay. Fitch's ratings range from AAA for its safest investments to a single D for highest-risk investments.
It’s still unclear what the rating will mean when the hospital goes to Wall Street to sell roughly $102 million in bonds in late August. But David Verinder, Sarasota Memorial’s chief financial officer, said it could translate to $1 million a year in reduced interest costs.
In its review, the ratings firm praised the hospital’s improved financial performance and the hospital board’s ability to raise taxes if financially necessary.
“Fitch believes the improved operating performance of the Hospital and financial flexibility afforded by the District’s ability to levy taxes is a key component to the ratings upgrade,” the firm said.
Its review noted that the board could generate an additional $39.7 million, if needed, if it increased the hospital tax to its legal maximum of 2 mills, or $2 per thousand dollars of taxable value.
The hospital is planning to increase its property tax rate from 0.941 mills to 1.08 mills next year, though that is a preliminary rate, pending two public hearings and a September board vote.
Fitch also noted that the hospital has $514 million in unrestricted cash reserves, enough for 418 days of operations, double the firm’s benchmark for the non-profit hospital sector. But the hospital plans to spend about $86 million of that on the tower project. The nine-story bed tower would replace a 50-year-old building on campus and house units including cardiac, orthopedic, labor & delivery and neonatal intensive care.
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Editor's note: changed headline from placeholder 7/29/09
