Fitch Ratings revised the outlook on Pennsylvania’s Willow Valley Retirement Communities to stable from negative.
Fitch also affirmed the A-minus on $23 million of Series 2001 Lancaster County Hospital Authority health center revenue bonds, issued for the facility; $6.6 million of the authority’s Series 1998A health center revenue bonds, issued for the Willow Valley Lakes Manor Project; and $3.4 million of Series 1997 Lancaster Industrial Development Authority health center revenue refunding bonds issued for the Willow Valley Manor Project.
According to Fitch analysts, Willow Valley Retirement Communities has addressed the concerns surrounding its debt profile for the near to medium term with the issuance of $60 million of variable-rate demand bonds supported by a three-year letter of credit from PNC Bank. The bonds, which are rated A-plus/F1, replaced a $50 million line of credit set to expire in January 2010.
However, analysts warned that the capital structure is still viewed as aggressive and will remain an ongoing concern due to the sole counterparty exposure and put risk.
WVRC has improved its operating performance, narrowing the operating loss — excluding investment income — to an unaudited total of only $360,000 in fiscal 2009, which ended Dec. 31, from $3.4 million in fiscal 2008.
The excess margin, though once again positive, remains depressed compared to historical levels due to low investment returns.
Liquidity metrics improved year over year due to an increase in unrestricted cash and investments to $73.7 million, a $7 million increase over the previous year. Though liquidity metrics remain relatively low compared to the category medians, it was somewhat offset by the significant reinvestment in the facilities, Fitch said.
