Moody's Puts Somerset Medical on Review for Downgrade

Moody's Investors Service has put the Ba2 rating of Somerset Medical Center on review for a downgrade, affecting $80 million in outstanding debt.

"Language was recently added to SMC letter of credit reimbursement agreement which states that failure of SMC to sign a letter of intent (or other document) on or prior to August 31, 2013 for a merger with another health system results in an event of default," Moody's analyst Sarah Vennekotter and vice president Beth Wexler wrote.

A default could result in the immediate acceleration of the center's $21 million in variable rate demand bonds.

Earlier this summer, the center in Somerville, N.J., and Robert Wood Johnson University Hospital (A2) announced their plan to merge, although no definitive agreement was signed.

"Our review will focus on SMC's ability to navigate a potential event of default under the reimbursement agreement and possible acceleration of the variable rate demand bonds, should the hospital not sign a merger document by August 31, 2013.

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Healthcare industry New Jersey
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