DALLAS — Good Shepherd Medical Center in Longview, Texas, could see another downgrade of its Ba3 rating by Moody's Investors Service after missing a deadline to sell assets under a forbearance plan.
"The Ba3 rating is being placed under review following a delay in completing the sale of assets, which is required under bank forbearance agreements," Moody's lead analyst Lisa Martin wrote in the Oct. 23 report.
Moody's downgraded the healthcare system to Ba3 from Baa3 on June 19 as Good Shepherd faced mounting financial pressures.
Eleven days later, Standard & Poor's dropped Good Shepherd three notches to a junk-bond rating of BB-plus from BBB-plus and maintaining a negative outlook.
The healthcare system had $182 million of outstanding debt as of June 30, according to S&P. But Moody's said its rating only affects $94 million of outstanding bonds.
GSMC signed forbearance agreements on July 25with Wells Fargo Municipal Capital Strategies and JPMorgan Chase Bank.
The forbearance period extends to noon Dec. 31, 2014, but GSMC had a deadline of Oct. 15 to raise funds from an asset sale, a deadline it missed. As a result, GSMC must provide $21 million of collateral grant a lien on a wellness center to the banks by Nov. 14, according to Moody's.
In its previous report, S&P said it would update its outlook based on the asset sale.
"We continue to believe that the system faces significant credit risks, including the risk acceleration if individual elements of its turnaround plan prove unsuccessful," Standard & Poor's credit analyst Karl Propst noted.
GSHS has incurred operating losses of more than $12 million after acquiring a hospital, since closed, in the small town of Linden. The system includes the flagship hospital in Longview and another in nearby Marshall.
GSHS president Steve Altmiller said the system has been hurt by Medicare/Medicaid reimbursement cuts, potential cuts to Critical Access Hospitals and a 2% cut in Medicare reimbursements due to the federal sequester.
