Moody's Investors Service said it has downgraded the Philadelphia Corporation for the Aging's Series 2001A (taxable) and 2001B (tax-exempt) ratings to Baa2 from Baa1.
The rating action affects $18 million of debt issued through the Philadelphia Authority for Industrial Development. The outlook is revised to negative from stable.
The downgrade to Baa2 reflects the Philadelphia Corporation for the Aging's decline in already limited liquidity, deterioration of extremely thin cash flow in FY 2013, and modifications in reimbursement process for a certain program that resulted in higher receivables and highlighted the institution's vulnerability to program changes given low resources.
The negative outlook reflects the potential for additional liquidity pressure due to more elevated receivables related to the reimbursement modification. The outlook also incorporates the possibility of funding cuts or delays related to budgetary pressure at the commonwealth of Pennsylvania (Aa2 stable).
The Baa2 rating reflects the organization's role as Philadelphia's Area Agency on Aging, providing services to low income seniors according to federal legislation. Additional strengths include expense flexibility and guaranteed funding in the form of a block grant from the Commonwealth of Pennsylvania for more than 60% of existing revenue. PCA's thin liquidity, anemic cash flow, and concentration of funding sources also factor into the rating.
