Moody's Investors Service said it has downgraded the long-term rating assigned to Proctor Hospital, Ill., to B2 from Ba2.
This action affects the Series 2006A bonds (approximately $22.5 million outstanding) issued through the Illinois Finance Authority. The hospital remains on the ratings under review list for further downgrade.
The downgrade follows a sharp drop in absolute cash and investments, continued operating losses and declining operating cash flow through fiscal year end (FYE) December 2012 and four months of fiscal year (FY) 2013.
The financial and operational problems are primarily due to revenue cycle problems caused by implementation of a new IT system. Additionally, management reports Proctor has violated its cash-to-debt covenant on its variable Series 2010 bonds, a private placement through Regions Bank, but has obtained a waiver for its covenants on known violations that existed through March 31, 2013.
In its FY 2012 audit, management disclosed it signed a memorandum of understanding to establish a strategic alignment with OSF Healthcare System who will assist the organization in remaining financially viable.