Bankrupt California hospital chain falls deeper into junk
The bankrupt Verity Health System in California had its long-term rating lowered to CC from CCC by S&P Global Ratings.
The ratings agency announced the downgrade on Monday. It also gave the health system a negative outlook.
Verity filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Central District of California in -Los Angeles on Aug. 31.
S&P lowered its rating on three series of 2005 bonds issued through the California Statewide Communities Development Authority’s: the $259.1 million series 2005A, $48.2 million series 2005G and the $17.6 million series 2005H.
Verity officials have said they will continue providing health services throughout the bankruptcy, but they intend to sell all or some of its assets.
The lowered rating reflects S&P's “view that the issuer is currently highly vulnerable to nonpayment over the next 12 months,” according to the report.
Management indicates that the system intends to continue to make its interest payments to the trustee during the proceedings, analysts wrote.
The negative outlook reflects the inherent risk of missing a debt service payment over the next 12 months, analysts wrote.
S&P defines a CC rating as: an obligation currently highly vulnerable to nonpayment. The CC rating is used when a default has not yet occurred but S&P expects default to be a virtual certainty, regardless of the anticipated time to default.
Verity operates six hospitals clustered in Los Angeles and the San Francisco Bay areas.
They are St. Francis Medical Center and St. Vincent Medical Center in southern California and O’Connor Hospital, St. Louise Regional Hospital, Seton Medical Center and Seton Medical Center Coastside in northern California. Verity also runs a physician network and medical foundation that includes urgent care centers and doctor’s offices.