Fitch downgrades Vidant

Published 12:34 am Wednesday, February 1, 2012

Fitch Ratings has downgraded Greenville-based Vidant Health from a AA- rating to an A+ rating, according to media reports and a news release from Fitch.

“The downgrade reflects Vidant Health’s (Vidant) continued low liquidity position even for the ‘A’ category and the expectation that there will be slow balance sheet improvement given fairly sizeable ongoing capital needs,” the release reads.

Fitch did highlight “improved operating performance” by the medical system, noting, “Vidant ended fiscal 2011 with a strong 4.3% operating margin compared to 2.5% in fiscal 2010 and 2.2% in fiscal 2009. The performance was driven by the increased capacity at the flagship facility (Vidant Medical Center), which resulted in improved volume in addition to ongoing cost containment initiatives.”

Fitch’s website says the rating service has 51 offices across the world. Fitch bills itself as “a global rating agency” that provides investors “additional context, perspective and insights.”

Vidant recently acquired and renamed the hospitals in Washington and Belhaven.

Those facilities are now known as Vidant Beaufort Hospital and Vidant Pungo Hospital, respectively.

Reached for comment Tuesday evening, two Vidant Beaufort council members wanted more information about the rating downgrade before offering detailed answers. They didn’t know whether the downgrade would affect the Washington hospital.

“I don’t know anything about the rating system,” said Dr. Jon Tingelstad, one of eight local people appointed to Vidant Beaufort’s Hospital Directors Council.

“No. 2, I’ve been either directly or indirectly involved with Pitt County Memorial Hospital for about 35 years, and have nothing but the highest regard for the service they provide,” Tingelstad added.

Council member Mitch St. Clair echoed Tingelstad.

“It’s news to me,” he said of the rating downgrade, declining further comment until he’d had a chance to look into the issue.

In its release, Fitch reported it downgraded hundreds of millions in “outstanding debt issued by the North Carolina Medical Care Commission on behalf of Vidant.”

“Vidant has $567 million of debt outstanding which is approximately 50% fixed rate and 50% variable rate,” the release reads. “Total debt has increased since Fitch’s last review with the issuance of $50 million series 2011 direct bank loan (Bank of America). Fitch believes Vidant’s debt profile is somewhat aggressive given its liquidity position.”

The medical system has continued expansion in the 29 counties it serves by adding hospitals to its stable, Fitch points out.

“This assists in providing care in the most cost effective setting as primary care is kept local while tertiary services are referred to its flagship academic medical center, Vidant Medical Center,” the ratings service said.

Among Vidant’s credit strengths are “strong market position and geographic coverage and solid operating performance,” plus the acquisition of two community hospitals — Vidant Beaufort and Vidant Pungo.

“The system is anchored by the academic medical center (in Greenville) with nine regional hospitals that serve as feeders to the tertiary facility,” the release continues. “Management indicated that it continues to evaluate growth opportunities for the system.”

The release displays Fitch’s confidence in Vidant’s growth strategy, referencing the medical system’s $62.8 million in operating income during fiscal 2011 as compared to $32.7 million in 2010.

Fitch calls Vidant’s rating outlook stable.

“The Stable Outlook reflects the expectation of continued solid operating performance driven by its excellent and growing market position, which should fund its robust capital plans,” according to the release.

A call seeking comment from a Vidant spokesperson wasn’t immediately returned Tuesday evening.