H2C INDUSTRY INSIGHTS: CAPITAL MARKETS

Credit Ratings and Actions

Week of November 7, 2022

Credit Ratings & Actions: Healthcare

October NFP Healthcare Rating Actions

October NFP Healthcare Upgrades/Downgrades

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  • Sauk Prairie Healthcare was upgraded due to maintenance of financial metrics and improved headroom to financial covenants. 

  • Erlanger Health System upgrade is reflected by improved financial performance that started in FY2020 and has been maintained through FY22.

  • Northern Hospital‘s decline in operating performance driven by expense pressures and expectations of thin debt service coverage, were the main reasons for the downgrade.

  • MultiCare Health System was downgraded because of operating stress and balance sheet metrics that have moderated due to market volatility.

  • Wise Health System downgrade was based on declining operating performance.

Rating Agency Commentary on NFP Healthcare Sector

Credit Spreads – 30Y Hospital Indices (4)  • (bps)

  • Fitch stated, “NFP hospitals and healthcare systems continue to be challenged with wage pressures resulting from high turnover and strong demand”. Fitch believes that a very challenging labor market will persist as “healthcare and social assistance job vacancies remain high against a backdrop of low unemployment” (1). 

  • Fitch also commented on a significant challenge for children’s hospitals once the pandemic phase of COVID-19 ends, “States and providers will have to prepare for significant Medicaid disenrollment's. An HHS report estimates that 5.3 million children are predicted to lose Medicaid/CHIP coverage after the COVID-19 Public Health Emergency (PHE) expires due to Medicaid’s continuous enrollment provision unwinding” (2). The latest 90-day PHE extension runs through Jan. 11, 2023, and there is uncertainty as to how much longer HHS will be willing to continue extensions.

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Source: Moody’s Investor Service, S&P Global Ratings, and Fitch Ratings.​

  1. Fitch Hospitals and Healthcare Systems Labor Dashboard: October 2022 dated October 25, 2022.​

  2. Fitch 2022 Median Ratios for Not-for-Profit Children's Hospital dated October 11, 2022​

  3. Current Moody’s/S&P/Fitch ratings, reflecting indicated October rating actions.​

  4. US NFP Hospital indices spread to AAA GO benchmark. Bloomberg BVAL indices. BVAL indices based on recent primary and secondary market trades and reflect impact of periods of market volatility and limited trading activity. Data as of November 4th.

Credit Ratings & Actions: Higher Education

October Higher Education Rating Actions

October Higher Education Upgrades/Downgrades

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  • Regent University’s significant increase in enrollment, healthy operating surpluses and material growth in available resources were all factors that led to its upgrade. 

  • College of Saint Benedict’s downgrade is primarily reflected by continued significant student market challenges such as decline in enrollment and tuition revenue. 

  • Deterioration of demand metrics and weaker available resource ratios and operations led to the downgrade of University of Indianapolis and Cabrini University.​

Rating Agency Commentary on Higher Education Sector 

Credit Spreads – 30Y Higher Education Indices (4)  • (bps)

  • The privatized student housing sector was one of the hardest hit during COVID-19. S&P noted, “More than 75% of currently rated projects received some form of university support or used reserves to meet their debt service requirements during the pandemic” (1).

  • Moody's stated, ”US public finance issuers…such as higher education….face growing cybersecurity risks as they digitize their operations and cyber crimes become more frequent.” The use of third-party software vendors that help with tasks such as revenue collection and database storage add increased exposure to cyber threats (2). 

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Source: Moody’s, S&P, and Fitch.​

  1. S&P “U.S. Privatized Student Housing Occupancy Rebounds; Ratings Will Take Longer To Recover As Projects Recoup Losses” dated October 17, 2022. ​

  2. Moody’s US Public Finance Credit Outlook dated October 26th, 2022.​

  3. Current Moody’s/S&P/Fitch ratings, reflecting indicated October rating actions.​

  4. US Higher Education indices spread to AAA GO benchmark. BVAL indices based on recent primary and secondary market trades and reflect impact of periods of market volatility and limited trading activity. Data as of November 4th , 2022.

Key Rate Updates

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Source: U.S. Department of the Treasury, Bond Buyer, Investment Company Institute, Bloomberg and Refinitiv/TM3 Data as of November 4, 2022.​


(1)   Weekly SIFMA and SIFMA/1M-LIBOR as of November 2, 2022​

The information presented herein was obtained from resources believed to be reliable and accurate, but H2C Securities Inc. does not guarantee the accuracy or completeness or assume a responsibility for any loss which may result from the action by any person upon such information. Such information is subject to change without notice and is not intended as a recommendation, offer, or solicitation with the respect to the purchase or sale of any security.

About H2C Securities Inc. ("H2C")

H2C is a strategic advisory and investment banking firm committed to providing superior advice to healthcare organizations, higher education institutions, and related companies throughout the United States. H2C’s professionals have a long track record of success in healthcare and higher education mergers and acquisitions, capital markets, and real estate transactions, acting as lead advisors on hundreds of transactions representing billions of dollars in value.

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H2C Capital Markets Team

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