Moody's Lowers Texas Hospital District to Caa1

DALLAS – Mission Regional Center, Texas' $29.6 million of bonds fell one notch deeper into junk-bond territory after the hospital district's debt-service coverage fell below required levels.

Moody's maintained its negative outlook as it downgraded the bonds to Caa1 from Ba2.

The downgrade "reflects the material and precipitous decline in unrestricted cash and investments over the last six months," analysts said. "The magnitude of the cash decline exceeds Moody's expectations."

Standard & Poor's downgraded the debt to BB-plus from BBB-minus Dec. 15, and maintained a negative watch.

The hospital, located in Mission, filed a disclosure notice on the Municipal Securities Rulemaking Board's EMMA Web site that the coverage ratios were below the 1.1 required by the bond covenant. While S&P considers that a technical default, the disclosure notice contradicted that.

"The noncompliance is not considered an event of default if a management consultant is retained to make recommended changes in rates, fees and charges or expense," the notice said. "Subsequent to year-end, the Hospital hired a management consultant."

Moody's attributed the problems to unexpected reduction in Texas Medicaid supplemental payments and continued decline in volumes.

Over the last six months of 2015, liquidity fell to $8 million or 26 days cash from $19 million or 63 days on June 30.