Fitch Ratings this week downgraded Marquette, a continuing-care retirement community located north of Indianapolis, to BBB from A-minus.
Fitch also assigned a negative outlook to the debt, issued by the Indiana Health Facility Financing Authority on behalf of Marquette.
The move comes after Marquette took on roughly $59 million of additional debt to finance a campus expansion.
The CCRC’s expansion, which will be complete in August, is expected to add 48 new independent-living units, Fitch said. So far, 42 of the units have been pre-sold.
Analysts also warned that Marquette’s debt portfolio poses some risks. Of a total of $71.6 million of bonds, 90% is variable rate, and just over $50 million is secured by a letter of credit with put features that pose term-out and remarketing failure risks, Fitch said.
As of last fiscal year, Marquette’s maximum annual debt service was 16.7% of revenue. But management plans to pay down a chunk of the debt to help moderate its burden over the next 12 to 24 months, Fitch said.
“While the project’s short-term impact on its debt position and operating profile is negative, Fitch views management’s proactive campus repositioning strategy favorably,” Fitch said in a release on the downgrade.