Fitch Ratings downgraded to A from A-plus its rating on Reid Hospital and Health Services last week, warning that the Richmond, Ind., facility continues to suffer from operating losses. Fitch revised the outlook to stable from negative.
The downgrade affects $180 million of bonds issued in 2009 and 2005. The $82 million of variable-rate demand bonds issued in 2005 are supported by a standby bond purchase agreement from JPMorgan Chase and are insured by Assured Guaranty Municipal Corp.
The facility has two swaps with Citigroup that cover $87.5 million of debt. The mark-to-market valuation as of July 29 was negative $14 million, Fitch said, while adding that it does not view the swaps as a credit risk because collateral is only required if either the hospital or Citigroup’s rating falls below A-minus.
Reid is a 237-bed facility that enjoys a dominant 82% market share in its primary service area in Wayne County. No other hospital in the area has more than a 5% market share, according to analysts. It also enjoys 245 days cash on hand.
The hospital has projected it will need only $76 million of capital spending over the next five years as it nears completion of a replacement hospital, Fitch said. Management said it expects to finish fiscal 2011 with a $12 million loss.