S&P lifts Wake Forest Baptist rating to positive after signing Atrium pact
S&P Global Ratings revised its rating on Wake Forest Baptist Medical Center’s bonds to positive from stable after the Winston-Salem-based health system signed a strategic combination agreement with Charlotte-based Atrium Health.
The credit rating service also affirmed its “A” long-term rating on the bonds issued by Wake Forest Baptist Obligated Group through the N.C. Medical Care Commission.
The revision suggests that S&P thinks Wake Forest will be better off financially partnering with Atrium, the state’s biggest health care system with annual revenue topping $10 billion.
The S&P action “ reflects just one of the many benefits we believe this integration will deliver. Being financially strong is essential to providing outstanding care, keeping costs down and providing an environment that allows us to continue to serve our patients and communities,” Atrium said in a prepared statement.
While both institutions have investment-grade ratings, S&P rates Atrium’s debt at AA-minus, which is two notches higher than Wake Forest Baptist under the agency’s scale. The Charlotte system has operated much more profitably than the Winston-Salem institution, which operates a medical school and is affiliated with Wake Forest University. Wake Forest Baptist lost $1.8 million in the year ended June 30.
Federal regulators are considering the combination, which officials say will not be a merger because the two institutions will remain separate legal entities and continue to answer to their respective boards. The agreement is expected to close early next year, S&P analyst Patrick Zagar wrote.
As part of the merger agreement, Atrium has pledged to add a large new medical tower at Wake Forest’s Winston-Salem campus that will include operating rooms and an emergency department, along with other new projects. Wake Forest is planning to expand its medical school in Charlotte under terms of the deal.