Fitch Ratings Wednesday downgraded the underlying ratings on $49 million of Marshall Medical Center, Calif. revenue bonds to junk-level BB-plus from BBB-minus, citing weak finances.

The outlook is stable at the new rating.

The ratings agency said it cut the ratings on two series of California Health Facilities Financing Authority hospital revenue bonds of the Placerville, Calif. hospital mainly because of cash flow problems.

MMC operates a 105-licensed-bed hospital and several clinics.

"The rating downgrade is driven by MMC's eroded balance sheet, which exhibits liquidity metrics that are incongruent with an investment grade rating," Fitch said in a report.

As of the end of January, the medical center had 48 days of cash on hand and 34% cash to debt, which is well below Fitch's requirements for BBB-rated bonds.

"The sharp erosion resulted from large and unexpected cash spending to complete MMC's much delayed patient expansion wing," the firm said.

It said the center was almost in violation of its liquidity covenant in the first quarter of fiscal 2013, and further demands on cash flow will come in the future from pension funding contributions, expected to be $10 million this fiscal year.

One of the series is insured by Ambac, which is not rated by Fitch, and the other is insured by Cal Mortgage, which is rated A-minus.

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