CHICAGO -- Moody’s Investors Service dropped Good Samaritan Hospital in Knox County, Indiana by one level to Baa2 and warned of the potential for further deterioration by leaving a negative outlook on the rating.

The action on Oct. 9 impacts $82 million of debt issued through Knox County. The current rating is two notches above a speculative grade.

The downgrade “is based on the decline in absolute liquidity well below projections and weak operating cash flow in the first half of fiscal year 2015,” Moody’s wrote.

The rating reflects GSH’s position as rural referral center with distinctly leading market share and completion of the new tower project which will moderate further liquidity decline.

The hospital’s defined contribution pension plan and absence of debt structure risks also limit pressure on the balance sheet.

“The negative rating outlook reflects challenges to achieving and maintaining targeted operating improvement in fiscal years 2015 and 2016 and the risk of further liquidity decline if improvement is not achieved,” Moody’s warned.

The hospital is undergoing a management transition, recruiting a permanent chief financial officer, which adds uncertainty, Moody’s said. GSH is a 165-bed acute care hospital owned by Knox County and a component unit of the county.

The bonds are secured by a gross revenue pledge of the obligated group and a mortgage pledge.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.