DALLAS - Standard & Poor's has joined Moody's Investors Service in downgrading Good Shepherd Medical Center, Texas another notch below investment grade.
The East Texas hospital operator now stands at BB-minus on the S&P scale and Ba3 on Moody's. Outlooks from both ratings agencies are negative, indicating a further slide that has pulled the healthcare provider into junk bond territory over the past year.
The latest action comes after Good Shepherd failed to complete an asset sale by the Oct. 15 deadline set by lenders. Good Shepherd has sought to renegotiate terms of its loans to avoid default.
A forbearance agreement with Wells Fargo Municipal Capital Strategies and JPMorgan Chase Bank expires at noon Dec. 31.
The forbearance agreements apply to Good Shepherd's series 2004, series 2012A and series 2012B bonds. The ratings on the series 2004 bonds are based solely on a bank direct-pay letter of credit, which expires on Oct. 1, 2015. The series 2012A and 2012B obligations (each equal to $39 million) are unrated direct purchase bonds held by JP Morgan Chase and Wells Fargo Bank.
"Although the series 2012A and 2012B debt is unrated, Standard & Poor's has reviewed the legal documentation for these obligations and will continue to assess the Good Shepherd obligated group's ability to meet the terms and conditions of those agreements," S&P analyst Karl Propst noted.
"We view management's longer-term turnaround plan as realistic but challenging," Propst added. "Maintenance of the ratings will depend on our view of management's ability to sell assets and achieve a net cash infusion of at least $40 million, GSHS' ability to comply with its financial and reporting covenants, and management's demonstrated progress toward its operational turnaround goals."
