Moody’s Investors Service stripped Proctor Hospital of its investment grade rating recently, lowering the credit to Ba1 from Baa3 and warning of further action by assigning a negative outlook due to a decline in operating performance since fiscal 2007.
The downgrade also is due to the hospital’s weakened liquidity position and variable-rate demand obligation exposure on $17.5 million of bonds from a 2006 issue. Proctor has $22 million of fixed-rate bonds outstanding from a 2006 issue that are affected by the downgrade. The variable-rate bonds do not carry an underlying rating.
“Proctor’s VRDO debt exposure is particularly concerning given that the letter of credit provided by JPMorgan Chase Bank that supports the bonds expires May 11, 2011,” analysts wrote.
The hospital has seen its liquidity steadily decrease from 116 days cash on hand in 2006 to 66 days in fiscal 2009.
Proctor is a community hospital that competes with two larger hospitals in its Peoria service area.
Standard & Poor’s also recently stripped Proctor Hospital of its investment-grade rating, downgrading the facility to BB-plus from BBB-minus due to declining operations that have hurt its debt-service coverage ratios.