Standard & Poor's Ratings Services lowered its long-term rating to BB-plus from BBB-minus on the Northern Inyo County Local Hospital District, Calif.'s series 2010 and series 2013 revenue bonds.
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," said Standard & Poor's credit analyst Kenneth Gacka.
The persistently lower-than-anticipated unrestricted reserves in recent years contribute to the assessment that the district's overall financial profile is more consistent with a speculative-grade rating. The district expects to receive a cost report settlement in the near term, which would strengthen unrestricted reserves by approximately $5.5 million (to an estimated 100 days' cash on hand). The rating agency views this favorably and expects this will result in improved metrics before the end of the current fiscal year.
The rating also reflects the district's history of strong margins and its solid business position. Certain aspects of the district's credit profile are good and consistent with recent years; however, 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.
