Fitch Ratings said that most municipal ratings have been unaffected by the volatility in the market for variable-rate bonds. The credit-rating agency does not expect most of the issuers of variable-rate demand obligation and auction-rate securities that it rates to be adversely affected as long as market conditions do not suffer further and marked deterioration.
In healthcare specifically, higher-rated providers have the cash and coverage to bear higher interest expense for several months, Fitch said. Lower-rated credits have fewer options and less financial cushion but do not appear to be highly stressed because variable-rate bonds are typically part of a diversified debt portfolio, Fitch added, saying there do not appear to be any healthcare providers in immediate danger of downgrade. Still, over the medium term, healthcare borrowers suffering high capital costs and difficulties in restructuring debt may face minor rating downgrades, according to the report.
Hospitals and nursing homes accounted for roughly one-quarter of the $196.2 billion in auction-rate debt issues during the past five years, according to Thomson Financial. Fitch noted that the turmoil in the markets is unrelated to the credit quality of municipal bond issuers, like hospitals. (For more on this topic, see Modern Healthcares Feb. 25 cover story.) -- by Cinda Becker
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