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Agencies Renew Hospital’s Strong Bond Ratings

WINSTON-SALEM, N.C. – The nation’s two key investment-rating institutions have both reaffirmed strong bond ratings for North Carolina Baptist Hospital, a major financial component of Wake Forest University Baptist Medical Center, citing the Medical Center’s current positive focus on integrating management, governance and strategic planning, as well as the hospital’s ongoing financial strength.

Wake Forest Baptist sought the ratings so that the hospital could refinance its current debt and issue fixed-rate bonds totaling $330 million, through the North Carolina Medical Care Commission. The bonds are being sold on Tuesday, Feb. 16, and Wednesday, Feb. 17.

Standard & Poor’s (S&P) gave the bonds a “AA-” rating and Moody’s an “Aa3,” both with a “stable outlook.” Although both ratings are unchanged from Baptist Hospital’s previous debt assignment, Medical Center officials said the renewed ratings are a major vote of confidence during uncertain times for health care providers.

“In a period that has been marked by widespread downgrades of health care organizations, we can absolutely say that our commitment to balanced excellence as an academic medical center, and our working together to improve the health of our region, state, and nation, have been very positively received by the capital markets,” said John D. McConnell, M.D., chief executive officer of Wake Forest Baptist.

Among the Medical Center’s strengths, Moody’s cited “new management that brings integration, academic and financial expertise and sense of urgency ... and will redesign a closer integration model” among the organization’s component institutions. S&P said the hospital was in a “good business position – highlighted by the hospital's regional market draw in the growing and economically favorable Winston-Salem region.”

Both agencies cited Baptist Hospital’s excellent balance sheet, but also noted the need for improved operating performance. Both, however, saw clear avenues to improvement. “The stable outlook reflects our belief that NCBH will show improved financial performance and manage sizable capital plans in accordance with improved financial metrics,” Moody’s said.

The need to increase overall market share in the Triad service area was also addressed in the agencies’ reports, although Moody’s noted Wake Forest Baptist’s “leading market share in a number of services,” including trauma, cancer, renal/urology, general surgery and pediatrics, and “an impressive draw for services” outside the Triad area.

“This will be the first time the hospital has accessed the fixed-rate bond market since 1992,” said Edward G. Chadwick, the Medical Center’s chief financial officer. “Through our bond disclosures and various presentations, we were able to ‘tell the story’ of the Medical Center to the investment community and rating agencies. Our efforts paid off in a strong rating that will help us to fund our capital needs in the foreseeable future.”

The Medical Center is now completing strategic and master facility plans, which provide a roadmap for excellence in patient care, education and research and define specific needs on its main campus and throughout the community.

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