St. Martin Parish Hospital Service District No. 2, LA Series 2018 General Obligation Bonds Rated #A-#; Outlook Is Stable

Stocks and Financial Services Press Releases Tuesday May 15, 2018 10:24
S&P Global Ratings--15 May--S&P Global Ratings
S&P Global Ratings has assigned its 'A-' long-term rating to St. Martin Parish Hospital Service District No. 2, La.'s series 2018 general obligation (GO) bonds. The outlook is stable.

"The rating reflects our opinion of the district's very strong wealth levels, very strong financial performance and flexibility, and adequate income levels," said S&P Global Ratings credit analyst Joshua Travis. "Offsetting these strengths, in our opinion, is the district's elevated overall net debt burden," added Mr. Travis.

As provided in our "U.S. and Canadian Not-For-Profit Acute Care Health Care Organizations" criteria (published March 19, 2018, on RatingsDirect), we have concluded that a lease agreement separates the operating risk of the hospital from that of the district. Therefore, we rate the bonds based on the application of our "GO Debt" criteria (published Oct. 12, 2006), as we believe that the operating lease agreement between the district and Lafayette General Medical Center (LGMC or the operator) sufficiently provides for this separation of operations.

The bonds are payable from the annual levy and collection of unlimited ad valorem taxes on all taxable property within the district. The bond proceeds will be used to acquire land and to make various additions to the existing hospital.

St. Martin Parish Hospital Service District No. 2 was created by an ordinance of the St. Martin Parish Police Jury in 1967. It serves an estimated population of 12,200 in and around the City of Breaux Bridge, which is a part of the Lafayette metropolitan statistical area.

The stable outlook reflects our opinion that the local economy will continue to recover, resulting in sustained modest growth in taxable values. The outlook further reflects our expectation that the hospital's operating risks have been sufficiently separated from the district via the operating lease with LGMC. We do not expect to change the rating within the two-year outlook horizon.

We could consider a higher rating if, all other factors remaining consistent, the district sees a substantial expansion and diversification of the local economy, resulting in an improvement in wealth and income metrics.

Conversely, if there were to be any adverse change in, or termination of, the operating agreement, resulting in the district directly operating the hospital, our view of the credit could change. We could also consider a lower rating if the tax base were to materially contract.

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.


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