NEW YORK - Standard & Poor's said it lowered its standard long-term rating on Louisiana Public Facilities Financing Authority's series 1993 and 1999 bonds, issued for Touro Infirmary (Touro) to BBB-minus from BBB, reflecting a weakened financial profile, magnified by the effects of Hurricane Katrina, which severely damaged the hospital and its operations when it came ashore on Aug. 29, 2005. The outlook is negative.
"The negative outlook reflects Touro's continued operating losses and challenges, which if not corrected over the next two years could result in an even lower rating," said Standard & Poor's credit analyst Karl Propst. "We believe that Touro has adequate liquidity to weather operating challenges, but we are concerned about Touro coming to the end of its outside financial support."
More specifically, the BBB-minus rating reflects Touro's continued sizable, although moderating, operating losses, which declined to $24.5 million through the 11-months ended Nov. 30, 2007; adequate, but weakened, liquidity, characterized by 135 days' cash, and a 87% cash-to-debt ratio; moderate, 45% long-term debt-to-capitalization ratio; and mediocre cash flow coverage of maximum annual debt service, equal to 1.8x.
The rating is supported by the recovery of patient volumes to near pre-Katrina levels, but challenged by the difficulty recruiting clinical staff, and the inefficiencies associated with driving the hospital back to a stable state.
The lowered rating affects about $97.7 million in rated debt.
