Proctor Drops to Junk

Standard & Poor’s last week stripped Proctor Hospital of its investment-grade rating, downgrading the facility to BB-plus from BBB-minus due to three years of declining operations that have hurt its debt-service-coverage ratios.

The hospital’s outstanding debt issued in 2006 was sold through the Illinois Finance Authority. Analysts said Proctor also has been hurt by a weakening market position. They expressed concerns about the risks posed by the hospital’s variable-rate debt exposure and renewal of its letter of credit.

Proctor’s operating losses in recent years have lowered coverage ratios to under two times.

Unrestricted liquidity provides just 66 days’ cash on hand. Proctor’s patient volumes have been on the decline and it ranks third in market share among three competing hospitals.

In Proctor’s favor is its good relationship with physicians.

“The stable outlook reflects our opinion that Proctor has increased flexibility at the BB-plus rating to work through the current operating difficulties, incorporate the new Caterpillar-contract-driven volume, and capitalize on management initiatives,” said analyst Jessica Goldman.

Proctor is a 162-bed, acute-care facility located in Peoria.

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Healthcare industry
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