Reading Health System Downgraded to AA-Minus by S&P

Standard & Poor's Ratings Services said it lowered its long-term rating to AA-minus from AA on Berks County Municipal Authority, Pa.'s revenue refunding bonds, issued for Reading Health System (RHS; formerly Reading Hospital & Medical Center).

The outlook is stable.

"The lower rating reflects operating performance and debt service coverage that are weak compared with median levels and some expected balance sheet weakening with an upcoming construction project," said Standard & Poor's credit analyst Jessica Goldman. "The unaudited fiscal 2014 results indicate a continued decline in operating performance and coverage."

The weaker performance is in part due to some operating expenses, which management notes are non-recurring in nature--so although the rating agency expects some operating performance improvement in the next year, it doed not believe it will be to a level in line with the prior rating.

The rating is supported by strong reserves in terms of days' cash on hand, strong business position and stable volumes in the most recent year. These strengths provide some cushion for operating challenges and somewhat offset the weaker operating performance and debt service coverage that are soft even for the current rating level.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER