DBRS Changes Trend on McGill University Health Centre to Positive; Confirms Rating at A (high)

DBRS Limited (DBRS) changed the trend on the Series A Senior Unsecured Debentures (the Debentures) of McGill University Health Centre/Centre universitaire de santé McGill (MUHC or the Hospital) to Positive from Stable and confirmed the Debentures rating at A (high). The trend change follows DBRS’s earlier trend change on the Province of Québec’s (Québec or the Province; rated A (high) with a Positive trend by DBRS) Issuer Rating and Long-Term Debt rating on May 27, 2019. At that time, DBRS stated it may adjust Quebec’s ratings within the following 12 months.

DBRS assigns highly important hospitals with the same rating as their provincial governments, provided no material deficiencies or concerns have been identified. This practice reflects DBRS’s view that there is the greatest likelihood of implicit support and thus the strongest linkage to the provincial credit profile for those hospitals that are fundamentally important to the provincial health-care system.

MUHC is among the largest hospital networks in Canada, providing highly specialized care to over 1.9 million Québec residents. It is strategically important for the broader health-care system in the Province and benefits from a strong reputation as a health-care group of leading teaching and research institutions. A disruption of health services at MUHC would be detrimental to the provision of health-care in the Province.

MUHC reported a smaller deficit of $11.4 million in 2018–19 compared with a deficit of $25.5 million in the previous year. The outlook suggests modest losses will continue as the Hospital seeks to offset persistent cost pressures with various efficiency or optimization measures. However, the outlook for additional provincial funding appears to be improving with the recent change in government and stronger provincial finances.

MUHC has experienced several governance and management challenges in recent years, but many of these issues have been or are being addressed. Dr. Pierre Gfeller was appointed the permanent President and Executive Director in 2018, and over the past year, he has appointed his management team, begun to make operational changes and sought to rebuild trust and relationships with many key stakeholders. The outlook now suggests a period of stability for the institution.

RATING DRIVERS:

A positive or negative rating action will most likely be tied to changes in the Province’s Issuer Rating and Long-Term debt rating. For more information about possible rating drivers, refer to the Province of Québec Rating Report dated June 4, 2019.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is Rating Canadian Public Hospitals, which can be found on dbrs.com under Methodologies & Criteria.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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