Fitch Negative on Bethesda Health Rating

Fitch Ratings has revised its outlook to negative from stable on the A-minus rating of Missouri's Bethesda Health Group Inc. due to balance-sheet strains from low occupancy levels and flat revenue growth that heightens concerns over its aggressive debt profile.

The rating action applies to $75 million of BHG's variable-rate demand health facilities revenue bonds issued in 2009. The bonds carry a letter of credit from U.S. Bank. Put risk is heightened by the December expiration of the LOC, and cash to puttable debt is 91%. Bethesda has begun discussions with potential credit providers, according to Fitch.

The bonds are secured by a pledge of unrestricted receivables. Total operating revenues have been flat over the last four fiscal years at around $60 million. The rating has also been strained by 2011 Medicare rate cuts and losses at one of the system's now-closed communities.

BHG has a seen a recent rebound in occupancy after three years of declines at its five independent living unit, or ILU, campuses. The system also operates one assisted- living facility and three skilled nursing facilities in the St. Louis area.

"The rating is supported by BHG's size and diversity of its communities, significant improvement in ILU occupancy through the interim period, and historically solid revenue-only MADS coverage," Fitch said.

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Healthcare industry Missouri
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