Fitch Places UF Health Jacksonville (FL) Rev Bonds on Rating Watch Negative
--\\$64.24 million Florida Development Finance Corporation healthcare facilities revenue bonds (UF Health-Jacksonville Project), series 2013A;
--\\$56.5 million Florida Development Finance Corporation healthcare facilities revenue bonds (UF Health-Jacksonville Project), series 2013B (R-FLOATs).
The master trust indenture includes a gross revenue pledge and mortgage pledge of the obligated group. The obligated group includes Shands Jacksonville Medical Center (now dba UF Health - Jacksonville), Shands Jacksonville HealthCare, and Shands Jacksonville Properties.
KEY RATING DRIVERS
STABLE FINANCIAL PROFILE: The 'BBB+' rating reflects UF Health-Jacksonville's (UFH-J) relationship with University of Florida (UF) and its position as one of two academic teaching sites for UF, trend of improved operating performance, and growth strategy in a service area with a better payor mix. The main credit concerns include its large indigent care burden, volatile supplemental funding environment, and weak liquidity. In fiscal 2015 (year ended June 30; draft audit), UFH-J generated operating and operating EBITDA margins of 4.2% and 10.2%, respectively, which is improved from prior year results.
RATING WATCH NEGATIVE: The Rating Watch Negative reflects the uncertain impact of UFH-J's plan to issue \\$85 million of additional debt to finance further development of its growth strategy on its credit profile. At the time of Fitch's last review in October 2014, it was noted that future debt capacity at the current rating level is limited without a commensurate improvement in balance sheet metrics.
ADDITIONAL DEBT: Fitch expects to meet with management in October and will assess the impact of the additional debt on UFH-J's credit profile at a date closer to the timing of the financing, which is expected to be mid-November.
UFH-J is an academic medical center located in Jacksonville, FL with 695 licensed beds. UFH-J has an extensive outpatient network with 38 primary care clinics in the service area. UFH-J is an integral component of UF and serves as one of their two academic teaching sites. Total revenue in fiscal 2015 was \\$590 million.