The BBB- rating on $13.2 million of debt issued for Garden City (Mich.) Hospital's obligated group has been placed on Standard & Poor's Corp.'s CreditWatch with a negative outlook.
Garden City's slim cash position and its anticipated issuance of
$13 million of long-term debt in May or June prompted the New York-based credit-rating agency to place the rating under observation.
If the proposed financing is completed, the rating will be lowered to the speculative BB category, Standard & Poor's said. The additional financing, needed to expand and renovate Garden City's emergency room, "will place pressure on a weak, but improving, income statement and stress the balance sheet," the agency said. Nevertheless, it still considers Garden City "a cost-effective" primary-care provider.
Meanwhile, Standard & Poor's has lowered its rating on Pontiac, Mich.-based North Oakland Medical Centers to BBB- from BBB, citing a larger-than-expected drop in its fund balance.
The downgrade affects $50 million of debt. Standard & Poor's said investment losses and accounting changes related to the hospital's privatization contributed to the lower balance.