NEW YORK - Moody's Investors Service has downgraded to B3 from Ba3 the long-term bond rating assigned to Weirton Medical Center, W.Va.'s (WMC) $20.3 million of outstanding bonds issued by the Weirton Municipal Hospital Building Commission.
The Series 2001B variable rate demand bonds are jointly supported by Weirton Medical Center and secured by a letter of credit from PNC Bank. The enhanced rating on the Series 2001B bonds is Aa3/VMIG1. The outlook is negative.
The rating downgrade to B3 from Ba3 is attributed to a very large operating loss and cash flow deficit through seven months of fiscal year (FY) 2012 driven by methodology change in its accounting for contractual reserves, revenue cycle impairment and continued outpatient volume declines.
The negative outlook reflects expected continuation of operating losses, and the uncertainty of the ability of WMC to quickly turn around operations and sustain improved performance over the longer term given a challenging payer mix, competitive environment and weak service area demographics.
Furthermore, WMC maintains very thin headroom under covenants under its letter of credit agreement. Discussions are underway with the banks to request a waiver for violation of the debt service coverage ratio.