Standard & Poor’s stripped Regina Medical Center of its investment-grade rating, downgrading the credit to BB-plus from BBB-minus due to an overall weakening in the hospital’s financial profile.

The rating agency also warned that another drop is a distinct possibility come, assigning a negative outlook to the credit. The action impacts nearly $13 million of bonds sold in 1998 through Hastings, Minn.

Regina Medical Center has recently experienced uneven financial operations, including operating and excess losses last year and through the first nine months of 2008. In addition, some reduction in financial flexibility has occurred as unrestricted liquidity has remained flat and debt has increased incrementally. Regina has seen two years of losses and an ongoing weakening of its debt service coverage ratios.

One bright spot is a closer affiliation with Allina Health System, which is rated A, that could help improve financial operations for the long term.

“If Regina were to achieve its improvement plan targets while ensuring the balance sheet remains consistent with rating level medians, we might return the outlook to stable within the next one to two years,” Standard & Poor’s analyst Suzie Desai said.

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