Standard & Poor's last week lowered its underlying rating on debt issued for the Northeast Alabama Regional Medical Center and revised its rating outlook to stable from negative on bonds issued for Baptist Health.
The underlying rating on $44.8 million of outstanding debt issued by the Anniston Regional Medical Center Board on behalf of the Northeast Alabama RMC was downgraded to A-minus from A primarily because of weak operating performance and projected operating losses for the next two years, analyst Geraldine Poon said in a report. The outlook is stable.
"The hospital's $54.6 million in unrestricted cash as of June 30, 2004, translates to 147 days' cash on hand and 119% of debt," Poon said. "While this compares unfavorably to the prior year when liquidity of $61.6 million represented 193 days' cash and 137% of debt, the balance sheet remains a credit strength that insulates the facility from operating fluctuations."
RMC posted operating margins of negative 3.6% and negative 1.7% in fiscal years 2004 and 2003, respectively. Cost increases - particularly in supplies and staffing - and contract labor combined with start-up costs of new service lines contributed to the decline.
The medical center is in Anniston with a strong market share in its five-county primary service area, Poon said.
Meanwhile, analyst John Fargnoli said Standard & Poor's revised upward to stable its BBB rating on bonds issued by BMC Special Care Facilities Financing Authority Montgomery on behalf of Baptist Health, which has $385.4 million of outstanding debt.
Among the credit factors cited were results for fiscal 2004, which was the first year of profitable operations since 1998; improved maximum annual debt service in 2004 of about 2 times compared to about 0.4 times in 2003; solid unrestricted liquidity of $210 million as of the fiscal year-end on June 30, equaling about 231 days' cash on hand; and dominance in the Montgomery market
"The outlook revision to stable from negative reflects Baptist Health's significant financial improvement in fiscal 2004 and Standard & Poor's expectation that Baptist Health will continue its solid financial performance in fiscal 2005," Fargnoli said.
