The A+ "underlying rating" on $112.9 million in revenue bonds issued for Sayre, Pa.-based Guthrie Healthcare System has been placed on CreditWatch, Standard & Poor's Corp. announced last week.
Because Guthrie's bonds are insured, its AAA rating remains in effect. The underlying rating is Standard & Poor's assessment of what the credit rating would be without any credit enhancement.
The CreditWatch placement reflects concerns relating to pending litigation and the financial position of Guthrie and other members of the obligated group-366-bed Robert Packer Hospital and Guthrie Clinic, a medical group practice with some 250 physicians.
Physician directors of Guthrie Healthcare System filed suit in May against Guthrie's board chairman, its president, a director and the system, Standard & Poor's said.
And in November, Guthrie Healthcare System passed a resolution demanding that Guthrie Clinic pay back $15 million.
Negotiations on the provisions of repayment are ongoing, the credit-rating agency said.
Guthrie executives wouldn't comment on the litigation other than to say that there's a tentative agreement to drop the suit.
According to legal documents reviewed by Standard & Poor's, the physician directors of Guthrie Healthcare System sought the removal of the defendants as directors of the company and contested certain corporate actions. They also called for an investigation of Guthrie's relationship to an affiliate that runs an inn and conference center.
The plaintiffs alleged that the relationship resulted in private gain, jeopardizing the system's tax-exempt status and putting the system at risk of default.