Standard & Poor’s downgraded $23 million of bonds issued for Clark Retirement Community Inc. by the Michigan Strategic Fund to BBB-minus and revised its outlook to negative.
The rating reflects Clark’s troubled financial history pocked by five years of deficits and limited liquidity — with just 153 days cash on hand — as well as weak debt coverage, analyst Stephen Infranco said in a release on the downgrade.
The retirement center’s outlook is further pressured by its plans to issue future debt to finance a new apartment tower on one of its two campuses in Grand Rapids.
“The negative outlook reflects Clark’s continued operating losses that have widened in fiscal 2009, coupled with declining liquidity,” Infranco wrote. “While the three-month interim operating results for the first quarter of fiscal 2010 indicate continued stress, management expects recent enhancements will increase occupancy and revenue, and will contribute to improved results for the full fiscal year.”
Clark’s managers have enacted several measures to improve operations, but without improvement another downgrade is likely — pushing the system’s debt into junk territory, according to Standard & Poor’s. On the positive side, Clark has a strong market position and historically strong occupancy rates, analysts said.
