Standard & Poor’s downgraded Louisiana’s St. Charles Parish Hospital Services District No. 1 to B-minus from BBB-minus and revised the outlook on the general obligation bonds to negative.
The action reflects a criteria change in Standard & Poor’s approach to tax-secured hospital districts. In cases where the underlying strength of the district is considered deeply speculative, the rating will be increasingly driven by the hospital’s financial and operating profile.
Operational risk is a credit concern to the extent that pledged revenues may be interrupted due to bankruptcy protection or diversion to operations. This includes GO bonds with an unlimited ad-valorem tax pledge approved by voters to pay debt service.
More specifically, Standard & Poor’s said the downgrade reflects the district’s precipitously weak liquidity, highlighted by unrestricted cash and investments equaling about two-days’ cash on hand and less than 5% outstanding long-term debt as of the last audit in fiscal 2006.