Moody’s Investors Service has pushed Keokuk Area Hospital’s rating on $5.4 million of debt further into junk bond territory due to its weak operating performance.

The agency lowered the rating to Caa2 from B3 and said the outlook remains negative.

The downgrade reflects KAH’s weak operating performance in 2010 and thinner cash levels.

The outlook remains negative due to the hospital’s continued operating challenges and liquidity pressures, along with Moody’s belief that should it file for bankruptcy a lower rating may be warranted based on the estimated recovery value of the bonds.

The debt is secured by a gross revenue pledge of the Keokuk hospital with a mortgage lien.

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