CHICAGO - Moody's Investors Service and Fitch Ratings have cut their ratings on William Beaumont Hospital as the Michigan-based system prepares to enter the market soon with more than $700 million of revenue bonds. Standard & Poor'swarned it is considering a downgrade as well
The downgrades stem in part from the system's significant increase in debt following the upcoming borrowing, which will be sold in two separate issues. Beaumont plans to issue $507 million in fixed-rate bonds in the next few weeks, followed by $200 million of variable-rate demand bonds.
The system plans to use proceeds to both refund outstanding auction-rate debt and finance a number of new capital projects. Including the new debt, as well as a planned $175 million sale in 2009, Beaumont's pro forma debt will increase 56% from fiscal 2007, according to Moody's.
Moody's downgraded the system to A1 from Aa3. Fitch cut its rating to A-plus from AA-minus. Standard & Poor's put the system on CreditWatch negative, warning that it's likely the rating would be lowered to the A category from its current rating of AA-minus.
In addition to Beaumont's increased debt burden, the system faces an array of challenges, including an expected decline in liquidity and financial performance, an increasingly competitive market, and the weak economic conditions in southeast Michigan, analysts said.
The opening of two new hospital facilities in western Oakland County is expected to have a further negative impact on the system's finances, said Fitch analyst James LeBuhn.
Based in Royal Oak, outside Detroit, Beaumont is a three-campus health care system. Operating revenue in 2007 totaled $1.85 billion.