LOS ANGELES - Moody's Investors Service on Monday affirmed the Baa3 credit rating of a Lancaster, Calif.-based hospital district that had been placed on review for downgrade in June following the unexpected resignations of the chief executive officer and the chief financial officer.
A one-notch downgrade would have bumped the $134 million in outstanding debt held by the Antelope Valley Healthcare District to speculative grade. The debt is fixed-rate, although there is a $55 million bullet in 2017, according to the ratings report.
Moody's analysts primarily attributed the review for downgrade to the resignations of AVHD's chief executive officer, Edward Mirzabegian, on May 1 and the chief financial officer, Cheryl Tong, on May 30.
The district still carries a negative outlook, however.
Confirmation of the Baa3 rating "reflects our expectation that AVHD's financial performance will not decline from current levels and the strategies outlined by management are likely to improve financial performance over the next year," Moody's analysts said.
The rating reflects analysts' concerns that the strategies carry high execution risk given the absence of permanent senior management, a weak payer mix, operating performance and reliance on intergovernmental transfers for a significant portion of cash flow, analysts said.
The negative outlook was based on the historically weak financial performance demonstrated by AVHD in recent years, Moody's analysts said.
Paul Brydon on July 10 was named interim chief financial officer of the district, which operates a 420-bed hospital located in northern Los Angeles County in a suburbanized region of the Mojave Desert.
Brydon began his duties on July 8. He will serve in the role until permanent replacements are found for the departed CEO and CFO, both of whom resigned to pursue other professional opportunities.
Pamela Hinson, who was appointed the hospital district's interim administrator on June 3, said that Brydon's "wealth of experience managing the fiscal responsibilities at hospitals and healthcare systems throughout Southern California will enable us to move seamlessly through this transitional period."
Brydon brings to AVH over 25 years of experience in healthcare finance. Most recently, he worked as a CFO at a number of hospitals including Northridge Hospital, Verdugo Hills Hospital, and executive level positions at Resurrection Health, Chicago and Catholic Healthcare West, and Bank of America. Brydon holds a bachelor's degree in economics from University of California, Davis and a master's degree in corporate finance from Golden Gate University.