Fitch Monitoring $80M of Maryland-Based Dimensions Health Debt After Late Filing

Fitch Ratings has announced that it is monitoring nearly $80 million of B-minus rated bonds issued on behalf of Prince George’s County, Md.-based Dimensions Health Corp., after the health care system failed to file its financial statement on time.

In a report this week, Fitch said Manufacturers and Traders Trust Co., the trustee for $79.3 million of Prince George’s County project and refunding revenue bonds issued for Dimensions, has filed a notice indicating the health care system “had not filled out its financial statement in a timely fashion,” said Fitch director Joseph Mason.

Dimensions will likely ask the trustee “for some additional time, because they’re still working with auditors,” Mason said.

Dimensions posted a notice on its Web site saying it would delay the release of its audited financial statement beyond the original Oct. 31 due date, citing management concerns the audit report would “adversely affect the corporation’s operations, debt ratings, and covenant compliance.” Fitch said in its report that Dimensions currently has until Dec. 14 to release its audit.

The extension to December “is part of master trust indenture,” Mason said. “Once Dimensions receives a notice of [technical] default from the trustee, that triggers the start” of a grace period for the health system to release its financial statements.

Dimensions, a nonprofit that is the largest provider of health care services in the county, operates Prince George’s County Hospital Center and five other health care facilities, and has been on the edge of defaulting on the Series 1994 bonds issued for its facilities for the last two years.

Officials in Prince George’s County decided in October to spend $30 million over the next five years to help bail out the nearly bankrupt health care system. To finance the bailout, the county can sell some surplus property to generate $5 million, and additional funds could come from excess income taxes and property recordation taxes, county budget director Thomas Himler has said.

Mason said the system and its auditors are contemplating adding a footnote to its financial statements noting the county’s contribution, but he added that Dimensions has only received $5 million in cash from the county, as per its earlier agreement.

The health care system “is in discussions with auditors about whether or not the county’s additional contributions would be sufficient,” Mason said.

Both Fitch and Standard & Poor’s rate Prince George’s County AA, and Moody’s Investors Service rates it Aa3.

In April, Fitch downgraded the $79.3 million of Prince George’s County revenue bonds sold for Dimensions to B-minus with a negative outlook from B-plus, putting them on par with the B3 that Moody’s had maintained on Dimensions since February 2001. Standard & Poor’s does not rate the credit.