Fitch Ratings assigned a negative outlook and affirmed its BBB rating on $77 million of revenue bonds issued for Mercy Medical Center, a 340-bed hospital located in Canton.
Fitch removed the credit from positive watch, which was assigned in late 2009 due to an ownership change. The negative outlook reflects MMC’s drop in profitability in 2009 and 2010.
The hospital has struggled with declining revenue and increased bad debt amid a weak economy, Fitch said. It is located in Stark County, which suffers from a 12% unemployment rate, one of the highest in Ohio.
“Fitch is concerned about the hospital’s inability to generate sufficient cash flow to support its debt service at the present rating level despite relatively moderate debt-burden indicators,” analyst Carolyn Tain wrote. “Fitch expects to see evidence of a sustainable improvement in profitability and maintenance of MMC’s current liquidity levels at year-end 2010. Failure to meet the rate covenant at year end and-or further deterioration in liquidity levels may result in negative rating action.”
