on Penn's and UPHS's Bonds
Investors Service recently revised the outlooks to stable from
negative on bond ratings for Penn and UPHS. Their report affirmed
the A1 rating on the University's bonds and the A3 rating on the
Health Services bonds. The University of Pennsylvania Health Services
has approximately $825 million of outstanding debt, of which $480
million is rated A3; a large portion of the remaining debt is
variable rate and supported by bank letters of credit. In addition
to the Health Services debt, the University has approximately
$560 million of outstanding debt, of which $340 million is rated
A1. $1.4 billion of total debt is affected by this rating.
rating revision for both Penn and UPHS reflects "substantial
progress at the Health Services operations in producing an operating
profit, reversing a history of large operating losses, stabilizing
liquidity and implementing more consistent financial practices
and more stringent financial controls. Despite notable improvement,
we believe a rating upgrade is precluded at this time based on
challenges the health system continues to face including a modest
cash position, short-term cash requirements above normal debt
service and capital spending, and wage and other expense pressures,"
Moody's report said.
A3 rating for Health Services also incorporates "the strength
of the University's commitment to and close relationship with
the health system and the financial resources of the School of
Medicine, although neither the University nor the School of Medicine
is legally obligated for the Health System's debt."
Almanac, Vol. 48, No. 15, December 11, 2001
December 11, 2001
Volume 48 Number 15