BRADENTON, Fla. - Moody's Investors Service lowered its general obligation bond ratings for Clarendon Hospital District, S.C., to Baa2 because of its narrow cash position.
Moody's maintained a negative outlook while announcing the three-notch downgrade to Baa2 from A2 on April 20.
The action applies to $4.8 million in Series 2011 A GO bonds that are rated by Moody's.
The acute care hospital had a total of about $31.77 million in outstanding GO and revenue bonds as of Sept. 30, 2014.
"The downgrade to Baa2 reflects the district's narrowed cash position, which is expected to improve modestly in fiscal 2015, the moderately sized tax base with below average wealth levels, and average debt burden," said Moody's analyst Edna Marinelarena.
"The negative outlook reflects our expectation that the district will be challenged to restore cash reserves given ongoing operating challenges faced by its health care facilities and the small-hospital sector overall," Marinelarena said.
As of fiscal 2014, the district's net cash position declined to a very limited $2.5 million, or 14 days cash on hand, according to Moody's. In 2014, the district used $3.8 million of cash reserves to defease $3 million of a privately placed revenue bond that was not in compliance with covenants, and to pay down other loans.
"We expect cash reserves to begin to strengthen slowly as the district's profitability improves," Marinelarena said. "However, given the operating pressures faced by the district, the low cash position provides no cushion for any adverse event that could arise in the near-term."
In 2014, Clarendon had $20.3 million of outstanding general obligation debt, of which Moody's rates the $4.8 million in 2011 bonds. The district also has $11.3 million of privately placed revenue bonds outstanding that are also not rated by Moody's.
"We believe the revenue bonds do not pose a risk to the outstanding general obligation bonds given that GO pledge is voter approved with a dedicated levy, and its legal structure bars the district from diverting tax receipts to support hospital operations," Moody's said.
In October, Standard & Poor's downgraded its ratings on the 2011A GO bonds to B from A-minus.
The Clarendon Health System is in Clarendon County, about 66 miles east of Columbia, the state capital.
