LOS ANGELES - Standard & Poor's dropped the revenue bond rating on Northern Inyo County Local Hospital district to junk, based on low unrestricted reserves.
The agency downgraded the district's series 2010 and series 2013 revenue bonds to BB-plus from BBB-minus. The outlook is stable.
"The rating action reflects our view of the district's low unrestricted reserves, which have consistently been lower than the district's projected levels in each of the past few fiscal years," Standard & Poor's credit analyst Kenneth Gacka said in a report Feb 14. "In our view, the persistently lower-than-anticipated unrestricted reserves in recent years contribute to our assessment that the district's overall financial profile is more consistent with a speculative-grade rating."
Gacka said the district is expected to receive a cost report settlement in the near term, which would strengthen its unrestricted reserves by approximately $5.5 million.
"We view this favorably and expect that this will result in improved metrics before the end of the current fiscal year," Gacka said.
The rating also reflects the agency's continued view of the district's history of strong margins and its solid business position. Certain aspects of the district's credit profile are good and consistent years, however, analysts believe that an improvement in unrestricted reserves to a level consistent with a higher rating that is sustained over time would be needed to return to a higher rating.
Northern Inyo Hospital is a 25-bed critical access, not-for-profit hospital located in Bishop, Calif.
Standard & Poor's in January revised the outlook on the district's general obligation bonds, rated A-minus, to negative. Analysts said that action was due to the risk associated with the district's liquidity position, which has fallen below forecasts.
