NEW YORK - Moody's Investors Service said it has downgraded Marietta Area Health Care, Ohio's (MAHC) underlying bond rating to Ba2 from Ba1.
The downgrade affects approximately $38.5 million of rated outstanding revenue bonds issued by Washington County, Ohio.
The rating has been removed from Watchlist and the outlook is negative. Additionally, there is approximately $33 million of outstanding fixed rate and variable rate demand bonds supported by Fifth Third Bank and JPMorgan Chase Bank Letters of Credit not rated by Moody's.
The one-notch rating downgrade is attributable to the heightened risks associated with MAHC's current debt structure with high variable rate debt and bank exposure, maintenance of very thin headroom to the days cash on hand covenants and ongoing discussions with one of the LOC banks for extension on two letters of credit that expire in the coming months (December 15, 2010).
The negative outlook reflects increased risk of violating the liquidity covenant for a second year given very thin headroom, elevated credit risk in the event the bank does not extend the LOC, any puttable bonds are not remarketed or refinanced and any outstanding bank bonds are accelerated by the banks and require immediate repayment. The negative outlook also reflects the uncertainty of whether recently improved performance will be sustainable over a longer period given weak service area demographics and high dependence on government funding.
