Fitch Upgrades Susquehanna Health System (PA) Revs to 'AA-'; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has upgraded to 'AA-' from 'A-' the rating on the $151,190,000 series 2009A bonds issued by the Lycoming County Authority, PA on behalf of Susquehanna Health System (Susquehanna).

The Rating Outlook is Stable.

KEY RATING DRIVERS

Substitution of Security: The upgrade to 'AA-' from 'A-' reflects the expected substitution of security on Susquehanna's outstanding debt with a master note from UPMC, (Fitch rated 'AA-') pursuant to the Aug. 26, 2016 signing of an affiliation agreement between Susquehanna and UPMC.

The effective date is expected to be Oct. 1, 2016 when UPMC will assume the obligation for the series 2009A revenue bonds issued by the Lycoming County Authority (LCA series 2009A) on behalf of Susquehanna. UPMC will execute a Supplemental Master Trust Indenture No. 27 pursuant to its Master Trust Indenture dated May 1, 2007 as security for the LCA series 2009A as well as SHS' other outstanding debt.

SECURITY

Effective Oct. 1, 2016 the LCA series 2009A bonds are expected to be secured by a revenue pledge of the UPMC Obligated Group (OG). UPMC standardized its bond covenants under the 2007 Master Trust Indenture (2007 MTI), and the series LCA series 2009A bonds will constitute parity debt under the 2007 MTI. UPMC (the parent corporation), UPMC Presbyterian Shadyside, Magee-Womens Hospital of UPMC, UPMC Passavant and UPMC St. Margaret are members of the obligated group under the 2007 MTI and accounted for 26% of consolidated system revenues and 66% of assets in fiscal 2016 (June 30 year-end).

For additional information, see 'Fitch Rates UPMC, PA's 2016 Revs 'AA-'; Outlook Stable' dated Sept. 14, 2016.

RATING SENSITIVITIES

Rating sensitivities are not applicable as this is just a security substitution.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria

Revenue-Supported Rating Criteria (pub. 16 Jun 2014)

https://www.fitchratings.com/site/re/750012

U.S. Nonprofit Hospitals and Health Systems Rating Criteria (pub. 09 Jun 2015)

https://www.fitchratings.com/site/re/866807

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1012497

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1012497

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Source: Fitch Ratings

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