CHICAGO — Moody's Investors Service downgraded Genesis Healthcare System to Ba2 from Ba1 April 4 citing declines in operating cash flows and other weaknesses.
The downgrade affects $295 million of bonds issued through conduit Muskingum County, Ohio.
The outlook is stable at the lower rating.
Genesis is a two-hospital system located outside Zanesville Ohio. It's governed by Franciscan Sisters of Christian Charity Sponsored Ministries and Bethesda Hospital Association.
"The downgrade to Ba2 reflects Genesis' material decline in operating cash flow margin in fiscal year 2013, compared to both fiscal year 2012 actual results and fiscal year 2013 budget," Moody's said in the downgrade report.
"The stable outlook at the lower rating level factors our expectation that Genesis' operating margins should stabilize and improve in fiscal year 2014. Also, we note that despite the challenged operating results, Genesis' cash on hand remained adequate for a Ba-rated credit at fiscal year end 2013 and that Genesis maintains a distinctly leading market share over its broad service area."
Genesis had 126 days cash on hand at the end of fiscal 2013.
Moody's may upgrade the credit if it improves its cash flow and debt coverage ratio. It could downgrade the system if its cash flow continues to weaken or there's weakening of other balance sheet ratios, the ratings firm said.
