Weirton Medical Junked

The Weirton Municipal Hospital Building Commission’s $7.5 million of revenue debt was downgraded by Fitch Ratings on Friday.

The bonds, which were issued in 2001 by West Virginia-based Weirton Medical Center Inc., were downgraded to BB-plus from BBB-mins. Fitch said the downgrade to below investment grade was based on continued operating losses and reduced liquidity.

Weirton has reported an operating loss for seven consecutive years, including a $1.27 million loss in fiscal 2008. Income from operations through the nine-month period that ended on March 31 was negative $1.5 million, according to Fitch. Inpatient admissions declined for a second straight year in 2008 and outpatient surgeries and clinic visits have also fallen.

Weirton’s liquidity position has declined reflecting negative returns from equity investments. The company’s days-cash-on-hand declined to 117 days from 162, while the cash-to-debt ratio decreased to 112.2% from 143.6% at the end of fiscal 2008.

The hospital’s liquidity position has historically been considered a strength, Fitch said, and Weirton was able to maintain this position by delaying improvements and upgrades. Now some equipment is showing its age, analysts said.

Fitch said it does not rate $13.9 million of adjustable-rate demand hospital revenue bonds, which are supported by a PNC Bank letter of credit. But Fitch said the hospital is exposed to renewal risk and put risk.

The LOC expires in January 2010 and should the bank decide not to renew, the hospital does not have adequate liquidity to cover the put, Fitch said.

Weirton, which is located about 35 miles west of Pittsburgh, is a 238-bed acute-care hospital.

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Healthcare industry
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