Moody's Investors Service has downgraded the Washington Township Health Care District's long-term revenue bonds to Baa1 from A3, affecting $232 million of debt.
The rating agency said the downgrade is a result of the California district's poor financial performance, which includes a large operating loss through the first nine months of the fiscal year. Moody's removed the credit from review for downgrade, but kept a negative outlook.
The district's management has blamed the financial problems on several factors, including a weak economy, a change in the services provided, higher uncompensated costs, as well as growing labor costs, according to Moody's.
Analysts said the operational loss is also due to the losses at the district's new medical foundation, which was created in March 2011. "Failure to improve performance and a further weakening of debt coverage measures could further pressure the rating," Moody's said.
Analysts said the district still had a healthy cash balance, along with all fixed-rate debt, and expectations that operations should turn around as management puts a recovery plan in place.