Standard & Poor's Ratings Services said it lowered its rating on Onondaga Civic Development Corp., N.Y.'s series 2012 tax-exempt revenue bonds, issued for St. Joseph's Hospital Health Center (SJH), one notch to BB from BB-plus.
The outlook is stable.
The downgrade reflects Standard & Poor's assessment of the unexpected sizable increase in debt to fund the installation of a new technology system and the construction of a cogeneration plant. It is Standard & Poor's view that the additional debt will likely place a considerable amount of pressure on SJH's already weak balance sheet metrics, leaving it with very limited financial flexibility. The rating service, however, believes the center's recent improvement in operating performance, affiliation with CHE/Trinity, and growing market share somewhat offset these weaknesses and support the current rating.
"We would base a lower rating on SJH's inability to maintain operations at current levels while successfully installing the new information technology system and any decrease in unrestricted reserves from current levels. We believe a higher rating over the outlook period is unlikely due to, what we consider, SJH's very weak balance sheet and history of uneven operating results," said Standard & Poor's credit analyst Margaret McNamara. "We would base a higher rating beyond the outlook period on considerable balance sheet improvement and the center's demonstrated ability to maintain margins in excess of 1% and annual debt service coverage of greater than 1.8x."
The stable outlook reflects Standard & Poor's opinion of the hospital's healthy market share, growing volume, and improved operating trend.
