OREANDA-NEWS. S&P Global Ratings has assigned its 'AA' rating to Rochester, Minn.'s series 2016B $290 million health care facilities revenue refunding bonds issued for the Mayo Clinic. At the same time, we affirmed all of our outstanding long - and short-term ratings on debt issued for the Mayo Clinic directly and through various issuers. We also affirmed our 'AA/A-1+' and 'AA/A-1' dual ratings on various issuers' debt issued for, or guaranteed by, the Mayo Clinic, as well as our 'A-1+' rating on the Mayo Clinic's commercial paper (CP) program and various bonds that are in CP mode. The outlook on all ratings is stable where applicable.

The 'A-1+' and 'A-1' short-term components of the affirmed ratings reflect the short-term ratings on the various standby bond purchase agreement (SBPA) providers, as well as our assessment of the Mayo Clinic's self-liquidity and its procedures for providing the funds in a timely manner.

"The long-term rating on the Mayo Clinic reflects an excellent enterprise profile as one of the country's leading health systems," said S&P Global Ratings credit analyst Martin Arrick. The Mayo Clinic has a diverse group of operating assets, though it relies on its flagship facility--two large tertiary hospital facilities in Rochester that together are known as Mayo Clinic Hospital-Rochester. Also supporting the rating is the Clinic's global reputation and its ability to attract tertiary and quaternary patients from all over the world to the Rochester campus as well as to its two other destination medical centers in Jacksonville, Fla. and Phoenix, Ariz. Research and education remain important components of the Mayo Clinic's overall profile and its mission.

"The stable outlook reflects our view that the Mayo Clinic's sound financial profile is sustainable over the two-year outlook period," added Mr. Arrick. However, certain financial characteristics, including leverage, unrestricted reserves, and non-operating income, have been historically volatile, in our view. We believe that rating stability over time depends, in part, on the Mayo Clinic continuing to steadily improve its balance sheet to generate a greater cushion for periods of volatility, such as heightened uncertainty in the health care industry or when investment market returns are down. The stable outlook anticipates that operating cash flow will be maintained at least at current levels and that there will be no additional debt as indicated by management over the current five-year forecast cycle.

We believe the Mayo Clinic has enterprise characteristics that are consistent with a higher rating, but a broad range of financial metrics would have to improve to at least 'AA' median levels for a higher rating or positive outlook. Conversely, should the balance sheet or cash flow unexpectedly weaken, either through investment market weakness or unexpected debt issuances that raise the level of total debt outstanding, or for any other reason, we could consider a negative outlook or a lower rating. In particular, we would consider a decline in operating margins to consistently under 2% or a reduction in unrestricted reserves to debt to under 140% as significant risks to the rating.