Banner’s credit rating holds up; PVH competition noted

GREELEY – Fitch Ratings, a credit-rating firm, has affirmed the outstanding ‘AA-‘ underlying rating on approximately $461 million in outstanding Arizona Health Facilities Authority revenue bonds issued by Banner Health System. The rating outlook is stable. Banner Health System operates North Colorado Medical Center in Greeley and McKee Medical Center in Loveland.
Banner’s strong operating margins, solid debt coverage, a light debt burden, good liquidity and a leading market position in its two core markets supports the affirmation. The company’s operating margin continues to improve and increased to 5.1 percent in fiscal 2003 from 2.8 percent in fiscal 2002.
Credit concerns identified by Fitch include increased competition for Banner from Poudre Valley Health System, which is planning on building an acute care hospital in Loveland.
The stable rating outlook is based on Fitch’s belief that Banner will continue to operate profitably given its market presence and management practices. However, Fitch notes recent profitability margins may be difficult to maintain due to increasing competition and the unlikelihood of sustaining large managed care contract rate increases.

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