Lawsuit Threatens Oregon CCRC Rating

Fitch Ratings has placed the A rating on revenue bonds issued for the continuing care retirement community Rogue Valley Manor, in Medford, Ore., on negative watch due to the potential impact from a lawsuit.

The credit rating agency acted in connection with plans to issue $45 million of revenue refunding bonds issued through the Medford Hospital Facilities Authority.

The sole corporate member of Rogue Valley Manor, Pacific Retirement Services, won an injunction in August from former board of directors trying to sever Pacific Retirement from its management role, according to Fitch.

Fitch said Pacific Retirement now faces a potential lawsuit that has been threatened by a group of residents who want to remove them as sole member and terminate the relationship with management.

Mediation between the two parties is scheduled for Oct. 30.

"If operations or occupancy deteriorate because of this issue, negative rating movement may be warranted," Fitch said.

Proceeds from the sale will be used to refund $22.5 million of Rogue Valley Manor's $61 million variable rate demand bonds issued in 2007, backed by a letter of credit from Bank of America, and $22.5 million will be used to refund part of $45 million of bonds placed with Wells Fargo Bank.

The bonds are secured by a gross revenue pledge and a first mortgage lien on the retirement community's facilities.

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