Moody's Investors Service said it has downgraded to Baa3 from Baa1 the long-term bond rating assigned to Arnot Ogden Medical Center, N.Y.'s $26.4 million of outstanding bonds issued by the Chemung County Industrial Development Agency.
The rating outlook is negative.
The downgrade reflects Arnot's severe downturn in financial performance in FY 2013.
The magnitude of the downgrade to Baa3 is due to Arnot's material decline in financial performance in fiscal year 2013 to barely breakeven operating cash flow, driven by severe volume losses that are not likely to return in the near-term and impairing the hospital's fundamental market position.
The negative outlook reflects the high degree of risk related to improving operations given volume challenges and increasing competition.
The rating remains at the investment grade level due to Arnot's very low debt and adequate liquidity relative to debt (215% cash-to-debt), which provides some flexibility and time to improve operations. Reduction in liquidity or inability to improve financial performance in FY 2014 could result in a rating downgrade.
