NEW YORK - Moody's Investors Service said it has downgraded to Ba1 from Baa2 the ratings assigned to Saint Barnabas Health Care System's $881.9 million of outstanding bonds issued through New Jersey Health Care Facilities Financing Authority and New Jersey Economic Development Authority.
The rating is being placed on Watchlist for possible further downgrade.
The downgrade to below investment grade reflects the effects of Saint Barnabas' weakened balance sheet and poor financial management. A further rating downgrade is precluded at this time due to the positive effects brought about by a new financial management team through the first nine months of FY 2009, an increase in liquidity since December 2008 and the long-term engagement of a professional turnaround team.
Most significantly, Saint Barnabas has employed a new system chief financial officer who brings significant system turnaround experience to this $2.4 billion organization.
The Watchlist action speaks to the near-term expiration dates (February 1, 2010 and March 15, 2010) on the forbearance and waiver agreements that Saint Barnabas will need to either extend or negotiate new expiration dates on the underlying 364-day credit agreement (with Wachovia Bank, NA) and letter of credit agreement (with JP Morgan Chase Bank, NA).
The Watchlist also speaks to near-term risks to the system in the event that mutually-agreed upon terms can not be reached with its two nursing unions or that negotiated terms add significantly to costs. Finally, interim performance is unaudited and as the organization rebuilds its financial infrastructure we believe the possibility exists for more year-end adjustments.
