Moody’s Investors Service late Wednesday downgraded the bond rating of St. Joseph Health Services of Rhode Island to Caa1 from B2, and plans to keep it on watch list for possible downgrade.
Moody’s said the outlook remains negative.
The action affects $18.2 million of outstanding Series 1999 revenue bonds issued through the Rhode Island Health and Educational Building Corp.
Several municipalities and conduit issuers, including the corporation have received downgrades after 19,000-population Central Falls filed for Chapter 9 bankruptcy protection on Aug. 1.
Moody’s said the downgrade and negative outlook reflect St. Joseph’s weak operating performance through 10 months of fiscal 2011 and extremely thin cash position.
“The negative outlook reflects the risk of a possible payment default and recovery values if St. Joseph’s cannot generate cash flow,” analysts said.
Challenges include a $53 million pension liability, the agency said, though the plan is not subject to Employee Retirement Income Security Act funding guidelines, given its status as a church plan. Strengths included a fully funded debt service reserve and proactive management.
