NEW YORK - Standard & Poor's Ratings Services said it revised its outlook to stable from positive on Massachusetts Health and Educational Facilities Authority's debt issued for Massachusetts Eye and Ear Infirmary (MEEI). At the same time, Standard & Poor's affirmed its BB-plus underlying rating (SPUR) on the authority's $16.6 million series 1998 bonds issued for MEEI.
The outlook revision reflects some uncertainty about the financial ramifications of a different strategic direction implemented by a new CEO. This action does not reflect concerns about the direction of the organization, but rather uncertainties about the future capital and operating needs resulting from the new strategy, precluding an upgrade at this time. The stable outlook reflects ample flexibility derived from MEEI's fundraising capabilities and cash balances.
The rating reflects MEEI's limited outstanding debt with few years left on the rated debt until maturity in 2011 and solid liquidity for the rating category. MEEI's continued operating losses have typically been offset by nonoperating gains, although for the current fiscal year, an accelerated loss, coupled with weak investment markets, may result in the first negative bottom line since 2004. MEEI relies on its service specialty niche, although the organization's new president is seeking to expand its service area draw through various types of affiliations and outreach services that may lessen dependence on the Boston-based business.
"While operations are likely to be weaker in fiscal year 2008, along with some uncertainty regarding the new strategic direction, the credit remains solidly BB-plus," said Standard & Poor's credit analyst Cynthia Keller Macdonald. "It is extremely unlikely that the rating would be lowered before the bonds mature unless MEEI issues a substantial amount of additional debt or losses increase significantly and a higher rating is possible if operations turn around and the growth strategy does not diminish balance sheet strength," Keller concluded.
MEEI remains the region's leading eye and ear hospital, with a strong national reputation and without competition for complex eye and ear procedures. It is also the primary teaching hospital for Harvard Medical School's ophthalmology and otolaryngology students. However, the industry over time has become increasingly ambulatory with less intensive procedures performed in physician offices. This trend, combined with MEEI's location among many other academic teaching hospitals in Boston, has constrained growth.
