UMass Memorial returned to investment grade status

SAM BONACCI UMass Memorial President and CEO Dr. Eric Dickson announcing that 500 jobs would be brought to downtown Worcester by the end of 2017. The organization's continued turnaround has made it more attractive to investors.

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By Sam Bonacci

After two years in a lower-rated category, UMass Memorial Health Care has been returned to investment grade status by two separate bond rating agencies.

While Fitch Ratings issued an 'A-' rating for the organization, Moody's Investors Service has upgraded UMass Memorial revenue bonds to Baa3 from Ba1. According to a release from Moody’s, this reflects the “durability of financial turnaround” following the second consecutive fiscal year of positive operating performance.Contributing to the Moody's rating was clarification of capital needs and future borrowing plans, with manageable near-term additional debt. According to the agency, successful cost containment and implementation of major information technology investments over the next two years could contribute to longer-term positive rating momentum.

The Moody rating, released last week, impacts approximately $265 million of outstanding rated debt. Both rating agencies categorized the health care organization’s outlook as stable.

As key drivers of the improved rating, Fitch last week cited the system's market position, which includes 43 percent of the inpatient market share in Central Massachusetts, improved operating results beginning in fiscal 2014, adequate liquidity, leverage and plans for capital investment.

Both of these ratings changes come as the Central Massachusetts healthcare system seeks to raise $177 million to pay for facility upgrades and refinance existing debt. The system plans to use about $60 million to fund facility upgrades at the University and Memorial campuses in Worcester, including work on the electrical systems and converting double rooms to private rooms. The remainder will be used to refinance bonds borrowed in 2005 and 1998, according to Fitch.

These higher ratings give the organization the flexibility to make improvements to facilities and technology, UMass Memorial Health Care President and CEO Eric Dickson said in a statement.