The Health Care Authority of the City of Huntsville, Alabama, will use a private-placement to fund its acquisition of the for-profit Crestwood Medical Center, and pay off that loan with municipal bonds.

Moody's Ratings says the $450 million acquisition of Crestwood is unlikely to have immediate credit impact on the authority's A1 rating and stable outlook.

The authority runs the Huntsville Hospital Health System.

The acquisition is subject to regulatory approvals and is expected to close by the end of June, Moody's said.

Huntsville plans to complete a short-term private placement — with the lender selected soon — to fund the purchase of Crestwood, said McCarley Northway, senior marketing and public relations coordinator at the health system. It intends to take out the short-term financing with a negotiated bond sale in late 2027, she said. It will select underwriters next year.

"By bringing Crestwood into the Huntsville Health family, we can better coordinate services, maintain local access to care and address growing capacity needs in the region," said Northway. "Huntsville is one of the fastest-growing cities in the country and this step helps ensure our health care system grows alongside our community, keeping care close to home and locally owned."

Jeff Samz, president and CEO of the system, said, "Through this acquisition, Huntsville Hospital Health System is continuing to invest in the specific health care needs of our patients and community and in our employees."

Crestwood is an 180-bed hospital with a freestanding emergency department, clinical and outpatient assets.

Huntsville's use of debt to purchase Crestwood will raise its leverage ratios, Moody's said. "Though the additional debt is credit negative, it is mitigated by Huntsville's strengthened market share — a key credit strength — and opportunities to capture operational synergies, which could strengthen system performance over time."

"Huntsville has a strong track record of successful acquisitions broadening its clinical and geographic presence in northern Alabama and southern Tennessee," Moody's said.

Huntsville Health benefits from a rapidly growing area population and its dominant market position, Moody's said in September. Huntsville Health also was aided by recent acquisitions of facilities and physicians, which will support operational growth. The health system also displays good liquidity management, Moody's said.

As credit negatives, Moody's said negotiated reimbursement rate increases were limited because one commercial payor dominates the area. Huntsville Health also relies on government payors for more than 50% of payments. Finally, Moody's said labor expenses continue to pressure operating performance.