Standard & Poor's Ratings Services said it lowered its underlying rating to C from CC on the Mendocino Coast Health Care District, Calif.'s general obligation bonds.

The outlook remains stable.

"The C rating reflects our view of the district's filing for bankruptcy protection under Chapter 9 of the U.S. Bankruptcy Code," said Standard & Poor's credit analyst Jen Hansen.

Pursuant to its criteria, a C rating may be used where a bankruptcy petition has been filed but payments on the obligation are continued. District management reports that the district has not missed a bond payment and projects that bondholders will continue to be paid from unlimited ad valorem taxes levied on taxable property within the district.

The stable outlook reflects the district's expected continued payment of its GO bonds despite its filing for bankruptcy protection under Chapter 9. S&P doesn't expect to change the rating within the next year; however, it could lower the rating if the district fails to pay debt service on its GO bonds.

Outside the outlook horizon, S&P would consider a higher rating if the organization successfully emerges from bankruptcy with a demonstrated ability to continue operations.

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