BRADENTON, Fla. – Georgia's Oconee Regional Medical Center missed its June 1 bond payment, although the hospital told bondholders that it still plans to pay the debt.
The default led S&P Global Ratings to slash the ORMC's ratings three notches to D on June 13.
The rating actions places $22.6 million of bonds issued in 1998 at the bottom of the junk scale. The bonds were issued on behalf of the medical center by the Baldwin County Hospital Authority.
The debt is secured by a gross revenue pledge, but is fully callable due to covenant violations, according to the latest audit.
ORMC's acute-care hospital in Milledgeville accounts for approximately 88% of the system's revenue and 94% of its assets, according to S&P. The hospital has a 140 acute-care beds and a 15-bed skilled nursing unit.
Oconee is "pursuing working capital financing" to help it make the June bond payment and fund other needs, according to a notice to bondholders posted on EMMA, the Municipal Securities Rulemaking Board's filing system.
"It is anticipated that the financing will be in place by the week of June 27, 2016 and that the scheduled June 1, 2016 payment will be made to bondholders at that time," the notice said.
Hospital managers will update bondholders during a 4 p.m. eastern conference call June 28.
The investment banking firm Houlihan Lokey has been hired to help ORMC "pursue a strategic process" to address the hospital's chronic financial distress.
A working group of bondholders is in contact with hospital officials.
The ORMC received a "going concern" opinion from auditors in April, which accompanied the audit for the fiscal year ended Sept. 30, 2015.
Auditors said the hospital system defaulted on covenants and has "continued to sustain significant operating losses," raising substantial doubt about its ability to continue as a going concern.
The audit also disclosed that a limited guarantee for the hospital's debt provided by Navicent Health Inc. was terminated earlier this year.
"As a result of cancellation of the limited guaranty, the 1998 bonds are considered callable, and as such the bonds were classified as a current liability in the 2015 consolidated balance sheet," the audit said.
