S&P Drops Erie County, Pa., Hospital Debt to BBB-Plus

Standard & Poor’s said it lowered its long-term and underlying ratings on Erie County, Pa., Hospital Authority revenue bonds issued for the Hamot Health Foundation to BBB-plus from A-minus due to soft operating performance and weak liquidity.

The rating agency also downgraded the authority’s Series 2008 bonds to AA-plus/A-1 from AAA/A-1. The AA-plus/A-1 rating is based on the application of joint criteria using medium correlation.

The long-term AA-plus component is jointly based on the BBB-plus rating of the obligor, Hamot Health, and the long-term A-plus rating of the letter of credit provider, PNC Bank NA. The short-term component is based on the short-term A-1 rating of PNC Bank.

Standard & Poor’s analysts said operating performance was worse than expected in fiscal 2008 partly due to an adjustment in recording bad debt in the final months of the fiscal year.

As a result, operating income was  negative $3.1 million, or negative 0.8%, an almost $8 million degradation from the previous year.

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