Dormitory Authority of the State of New York -- Moody's upgrades NYU Langone Hospitals (NY) to A2; outlook revised to stable

Moody's

January 21, 2022 at 5:03 PM·13 min read

Rating Action: Moody's upgrades NYU Langone Hospitals (NY) to A2; outlook revised to stableGlobal Credit Research - 21 Jan 2022New York, January 21, 2022 -- Moody's Investors Service has upgraded NYU Langone Hospitals, NY (NYULH) revenue bonds to A2 from A3, which includes the debt of Winthrop-University Hospital Association, NY as member of the obligated group. Total debt outstanding is $3.2 billion as of 2021. The outlook has been revised to stable from positive.RATINGS RATIONALEThe upgrade to A2 reflects continued extensive growth initiatives and expense controls which will continue to translate into robust margins and significant cashflow that will provide a cushion for anticipated large capital spend over the next several years. The upgrade incorporates elevated capital spend, which will be funded with cash flow, potential borrowings and strong philanthropic support, following successful capital campaigns in recent years. NYULH will continue to benefit from its proven ability to execute multiple strategies despite the on-going pandemic, a governance consideration, and strong brand equity as the quaternary academic medical center for the NYU Grossman School of Medicine (NYUGSOM) as well as its comprehensive clinical network. In addition, its extensive ambulatory footprint will provide differentiation in a highly competitive and fragmented market. Offsetting considerations include a high debt burden, large unfunded pension liability, material operating leases, still modest balance sheet resources, and a highly competitive market. Although the balance sheet has strengthened, days cash (excluding Medicare advances) and balance sheet leverage will remain weaker than peers and medians for several years as capital spending consumes a significant portion of cash flow.RATING OUTLOOKThe stable outlook expects that NYULH will continue to generate robust margins to offset high capital spend and potential additional borrowings.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Notable growth in unrestricted cash and investments relative to operating scale and debt- Sustained clinical market strength and margins commensurate with current levels which results in significant deleverageFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Sustained departure from recent trends of strong operating performance- Weakening of balance sheet measures or inability to incrementally build balances beyond expectations- Additional financial leverage which weakens debt metrics- Change from current governance structure or deterioration of relationship with NYU- Difficulty integrating new entities leading the system to underperform relative to budget or dilutive acquisitionLEGAL SECURITYNYULH is the sole Member of the Obligated Group under the Master Indenture. Bonds are jointly secured by a pledge of gross receipts and a mortgage of certain health care facilities of NYULH.PROFILENYULH is an academic teaching institution anchored in midtown Manhattan, with additional facilities throughout the New York City area and Long Island. NYULH consists of five inpatient locations: Tisch Hospital, the Kimmel Pavilion which houses the Hassenfeld Children's Hospital at NYU Langone, located on the campus shared with NYU Grossman School of Medicine; NYU Langone Orthopedic Hospital, an orthopedic, musculoskeletal, neurologic and rheumatologic specialty hospital located in Manhattan; NYU Langone Hospital Brooklyn (formerly known as Lutheran Hospital), located in Brooklyn; and NYU Winthrop Hospital (formally, Winthrop-University Hospital Association), located on Long Island. NYULH also operates a vast array of ambulatory facilities throughout New York City's five boroughs; Long Island; New Jersey; Westchester County, NY; and Florida.METHODOLOGYThe principal methodology used in these ratings was Not-For-Profit Healthcare published in December 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1154632. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. 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Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Matthew Cahill Lead Analyst PF Healthcare Moody's Investors Service, Inc. 7 World Trade Center 250 Greenwich Street New York 10007 JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Susan Fitzgerald Additional Contact Higher Education JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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