Standard & Poor’s last week downgraded North Country Health Services’ debt to BBB-plus from A due to poor operating results. The action affects $13.3 million of debt sold in 2006 through the city of Bemidji and $37 million of debt sold in 2002.

The rating change reflects NCHS’s negative 0.2% operating margin in the fiscal year ended Sept. 30, 2008, after posting two years of operating margin gains of 1.9% or better, analysts wrote. The pressure is continuing as reflected in a budgeted negative 0.5% operating margin expected for fiscal 2009. 

NCHS has reported a decrease in admissions to 4,920 in fiscal 2008 from 5,250 the previous year, after the retirement or departure of several physicians from the community.

The hospital also faces fiscal exposure related to two notes totaling $13.1 million issued on behalf of a non-obligated affiliate, North Country Senior Living LLC. Proceeds are financing construction of a 107-unit assisted-living facility scheduled to open in October.

“The rating for NCHS remains at the high end of the BBB rating category reflecting its leading business position and limited competition in its primary service area,” Standard & Poor’s analyst Kenneth Rodgers wrote.

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