DALLAS – Mission Regional Medical Center, a public hospital in Texas' Lower Rio Grande Valley, is in danger of default, according to S&P Global Ratings analysts who downgraded $26.7 million of debt five notches to B-minus and maintained a negative outlook.
"Mission was placed on CreditWatch with negative implications after fiscal 2015's substantial $12.5 million operating loss, and our expectation that the medical center would breach its minimum debt service coverage covenant, resulting in an event of default under the bond documents," S&P Global Ratings analyst Kevin Holloran said Friday.
The hospital operates under the Hidalgo County Health Services Corp.
S&P had cut the hospital's rating to a non-investment grade rating of BB-plus on Dec. 15, warning of further downgrades.
"The negative outlook reflects our view of Mission Regional's substantial deterioration of operating income levels in fiscal 2015, resulting in a technical event of default and obligating Mission to enter into a cure period of one year by engaging a consultant to secure debt service coverage above 1x by fiscal 2016 year end," Halloran said Friday.
Over the last six months of 2015, MRMC's liquidity fell to $8 million or 26 days cash from $19 million or 63 days on June 30, according to Moody's Investors Service, which downgraded the bonds to Caa1 from Ba2 in February.
Analysts from both agencies cited the hospital's reliance on supplemental sources of funding, including Medicaid disproportionate share and uncompensated care programs.
"We assessed Mission's enterprise profile as adequate, reflecting the medical center's competitive primary service area and its 24.5% market share, and its financial profile as vulnerable citing Mission's extreme operating volatility as of late, and limited reserve levels," Holloran said.
