Fitch Ratings has downgraded Elmhurst Memorial Healthcare's rating one level to BBB-plus and warned of impending further negative action by placing it on rating watch negative, due to the Illinois hospital's financial performance.
The action affects $126.7 million of 2002 debt, $120.3 million of 2008 bonds and the underlying rating of $250 million of variable-rate 2008 bonds that were issued in four series and are supported by bank letters of credit.
The downgrade followed a review of results through March. Analysts will update the rating when full-year results are available from fiscal 2012.
"EMH's operating performance and liquidity position in fiscal 2011 were well below fiscal 2010 results, with 291.3 days' cash on hand," compared to 391.7 days' a year earlier, Fitch wrote. The hospital's operating margins fell to 2.8% from 8% a year earlier.
As of March 31, liquidity had weakened to 206.2 days' cash on hand and a 42.8% cash-to-debt ratio, due to a planned $35 million equity contribution towards construction of its new facility, collateral posting on swaps and a temporary increase to accounts receivable.
"The rating watch negative reflects the concern about the decline in performance. Fitch expects to have a discussion with management in October after the 2012 audited financials are available and will update the rating at that time," analysts wrote.
Elmhurst is located just west of Chicago.
