Hospital District Knocked Down

Moody’s Investors Service Tuesday issued one-notch downgrades to bonds issued by Palomar Pomerado Health, a hospital district in San Diego County.

The downgrade comes in connection with a forthcoming revenue bond issue from the hospital district. Moody’s dropped the revenue bond rating to Baa2 from Baa1.

Moody’s also downgraded the district’s general obligation bonds to A2 from A1.

“The downgrade reflects a substantial increase in debt that is greater than expectations, resulting in materially stressed balance sheet measures,” the rating agency said in a release. The outlook remains negative.

The actions affects underlying ratings on a $225 million revenue bond issue expected next week, $215 million of outstanding revenue bonds, and $423 million of outstanding GO bonds, which are repaid with a voter-approved ad valorem property tax.

The hospital district is in the midst of a significant capital improvement program, focused on construction of a replacement hospital building for its Palomar Medical Center.

According to Moody’s, the last several months have seen “significant cost escalation of the projects.”

The district has also generated less operating cash flow than it had projected when the capital program was launched, according to Moody’s, leaving less cash available to fund the program, and requiring additional bond issuance.

The district’s audited results for fiscal year 2009 “show impressive improvement,” according to Moody’s.

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Healthcare industry California
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