S&P rates Kaiser Permanente, CA 2011 bonds ‘A+/A-1′

Standard & Poor’s Ratings Services assigned its ‘A+/A-1′ rating to the $204.5 million series 2011A, 2011B, 2011C, and 2011D bonds, issued by the California Health Facilities Financing Authority on behalf of Kaiser Permanente (Kaiser). At the same time, we affirmed our ‘A+/A-1′, ‘A+’, and ‘A-1′ ratings on Kaiser’s outstanding bonds (various issues). The outlook on all long-term ratings is stable. Management is considering a private placement for the 2011A, 2011B, 2011C, and 2011D series, which will be floating-rate notes; management reports that there are no cross-default provisions and no acceleration events. Kaiser is also planning to convert its 2002E bonds to variable-rate demand obligations backed by self-liquidity, its 2004I bonds to commercial paper, and its 2009E-1 and 2009E-2 bonds to short-term put bonds.

“The ‘A+’ long-term rating reflects our view of Kaiser’s solid and well-established market position, sound revenue increases, and ability to contain costs through its care management model and information technology,” said Standard & Poor’s credit analyst Geraldine Poon. “The ‘A-1′ short-term rating reflects our view of the ample liquidity and sufficiency of the assets available to support the full and timely purchase of any bonds tendered upon the event of a failed remarketing.”

The stable outlook reflects our view of Kaiser’s sound business position, relatively stable operating performance, and sound liquidity. We consider Kaiser’s credit fundamentals solid, and we expect consistent operating performance going forward. The outlook assumes that Kaiser will be able to fund its significant capital program from cash flow. The outlook also assumes maintenance of Kaiser’s solid market position, particularly in its core HMO market, as well as growth in new product offerings. We continue to monitor the system’s unfunded pension liability.