Moody's Investors Service pushed the rating of struggling Proctor Hospital in Illinois further into junk bond territory, lowering it three levels and warning of further deterioration.
Moody's downgraded $22.5 million of rated debt issued through the Illinois Finance Authority to B2 from Ba2 and said the rating remains under review.
"The downgrade follows a sharp drop in absolute cash and investments, continued operating losses and declining operating cash flow through fiscal year end December 2012 and four months of fiscal year 2013," Moody's wrote. The financial and operational problems are primarily due to revenue cycle problems caused by implementation of a new IT system.
Management also reported that Proctor has violated its cash-to-debt covenant on its variable Series 2010 Bonds which were privately placed through Regions Bank, but has obtained a waiver for its covenants on known violations that existed through March 31, 2013.
The hospital has signed a memorandum of understanding to establish a strategic alignment with OSF Healthcare System who will assist the organization in remaining financially viable, Moody's reported.
Proctor serves the highly competitive Peoria market and generated $115 million in annual revenues.