Fitch Affirms ‘A’ Rating for Sierra View Local Health Care District

Fitch Ratings has affirmed the ‘A’ rating on two bonds for the Sierra View Local Health Care District: $18.555 million refunding revenue bonds, series 2010; and $51.52 million revenue bonds, series 2007.

“The rating outlook is stable,” Fitch stated in an April 7 press release. “The rating affirmation is primarily driven by the district’s strong balance sheet with 425.8 days cash on hand and 183.6% cash to debt at December 31, 2013. Fitch expects the balance sheet to remain strong.”

Fitch’s main credit concern is the district’s high debt burden with maximum annual debt service. At 5.7% of total revenue in fiscal year 2013 (which ended June 30, 2103), the ratings company finds this number unfavorable compared to its ‘A’ category median of 3.1%.

Although the district’s profitability levels are healthy, there is a significant reliance on supplemental funds for this profitability, according to Fitch. Supplemental funds include about $7-8 million of Medicare and Medi-Cal disproportionate share funds a year.

Sierra View has ongoing capital needs to address seismic retrofit regulatory requirements, as well as growth initiatives in various service lines. The district has more than $50 million of remaining bond and capital lease proceeds to fund these projects.

Fitch expects the district to maintain profitability consistent with its fiscal 2013 performance. Fitch also expects the strong balance sheet to be maintained.

The Sierra View Local Health Care District owns and operates a 167 licensed-bed hospital, a cancer center, an outpatient imaging and laboratory center, an outpatient dialysis center and an ambulatory surgery center operated as a department of the hospital, all in Porterville.

The district generated total operating revenue of $135.8 million in fiscal 2013. There has been management turnover since Fitch’s last rating review, including a new chief executive officer and chief financial officer in 2013.

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