Standard & Poor’s last week lowered its rating on Lanier Health Services bonds issued for Chattahoochee Valley Hospital Society Inc. to BB-plus from BBB-minus, reflecting a proposed 50% increase in long-term debt and recent operating losses.

The drop to non-investment grade affects about $12.71 million of rated debt. The outlook is stable.

“The stable outlook reflects our expectation that management will successfully execute its plan to correct current operating weaknesses and restore positive operating margins over the next two years,” said Standard & Poor’s analyst Karl Propst. “We also expect that Lanier will capture adequate new patient volumes from the expected population influx within its 10-county total service area without dilution of its current market share.”

Propst said the lower rating reflects Lanier’s proposed increase to long-term debt, a $1.98 million net operating loss for fiscal 2007, a $500,000 operating loss for the six months ending on Dec. 31, a weak 1.1 times pro forma maximum-annual debt service coverage, clinical staff concentration with 72% of inpatient admissions generated by the top 10 admitting physicians, and new senior leadership.

The downgrade comes ahead of Lanier’s planned issue of $25.8 million of refunding bonds rated BB-plus by Standard & Poor’s. Further details on the sale were not immediately available.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.