Fitch Ratings last week revised the outlook on the Georgia DeKalb County Hospital Authority to negative from stable.
Fitch affirmed the BBB rating on the $180.8 million of 2010 revenue anticipation certificates and $8.6 million of 2003A revenue anticipation certificates issued on behalf of the DeKalb Medical Center.
The 2003A bonds are insured by Assured Guaranty Municipal Corp.
"The outlook revision to negative reflects a decline in operating cash flow which was below Fitch's expectations and below budgeted levels," according to analyst Emily Wadhwani.
DeKalb produced a 7.4% margin in EBITDA - earnings before interest, taxes, depreciation and amortization - in fiscal 2012 and 6.4% EBITDA margin through the first six months of 2013.
The margins fall "well below" Fitch's BBB rating category medians, Wadhwani said. "A downgrade is currently precluded by DeKalb's healthy liquidity profile that well exceeds Fitch's BBB-rated medians, despite some mild erosion in 2012 and interim 2013."
As of Dec 31, DeKalb had $170.2 million in unrestricted liquidity, which equates to 154.8 days cash on hand and 91.3% cash to debt.
DeKalb is a nonprofit integrated regional health-care system operating in eastern metro Atlanta, and consists of a 451-bed acute-care hospital in North Decatur, a 100-bed acute-care hospital in Hillandale, and a 76-bed long-term, acute-care facility in downtown Decatur.
"While the metropolitan Atlanta service area is very competitive and dynamic, DeKalb has maintained a steady market position," said Wadhwani. "Still, Fitch believes DeKalb will need to preserve existing share and successfully grow its presence in new markets to offset the threat of competitors."
DeKalb will need to produce steady operating results to meet its fiscal 2013 projection for a $17.2 million operating loss, Fitch said, adding, "Negative rating action is likely if operating results are weaker than projected, or if there is an unanticipated decline in liquidity."
