NEW YORK - Moody's Investors Service said it has placed the Ba3 underlying rating assigned to Weirton Medical Center, W.Va., (WMC) on Watchlist for potential downgrade affecting $20.3 million of rated bonds outstanding.
The Watchlist action is based on continued losses, cash decline, and heightened credit pressures with a debt structure that has 50% variable rate demand bonds.
Based on unaudited seven months of fiscal year (FY) 2012 financial results, WMC is posting a notably larger than anticipated operating loss of $10.5 million and cash flow deficit of $7.9 million following an operating loss of $2.5 million and cash flow generation of $4.3 million in FY 2011.
In October 2011, the board chose to terminate earlier than planned the management contract with Quorum Health Resources, which was entered into for two years in May 2010 to help turnaround operations. Management has since hired a new CFO and chief nursing officer to assist with turnaround operations.
Moody's expects to complete the review within 90 days or earlier and after speaking with management in the coming weeks to discuss turnaround plans and status of letter of credit bank agreement and covenant and repayment provisions.