Fitch Ratings has downgraded to A from A-plus the rating on $50.7 million state of Connecticut Health and Educational Facilities Authority revenue bonds, series F (2011) issued on behalf of Lawrence & Memorial Hospital (LMH).
The rating outlook is revised to stable from negative.
LMH also has outstanding approximately $61 million in other long-term debt and leases, which are not rated by Fitch.
The bonds are secured by a pledge of gross revenues and a mortgage.
The downgrade to A is driven by sustained profitability weakening impacted by a combination of declining utilization and a three-week labor strike in November and December 2013.
The strike resulted in volume loss and heightened expenditures, with total impact estimated at 200 discharges or $14.3 million. A new labor contract has been signed through June 30, 2016, which prohibits any additional strikes over its term. Operating margin was a negative 4.7% through the nine months ended June 30, 2014. Without the strike impact, LMH's operations would have been about breakeven in the interim period compared to 1% the same prior year period.
