Fitch places St. Joseph’s bonds on positive rating watch

FITCH RATINGS LTD. placed St. Joseph Health Services of Rhode Island's $17.8 million, series 1999 bonds on rating watch positive due to a pending deal between the hospital's parent company and Prospect Medical Holdings.
Posted 4/2/13

NEW YORK – Global rating firm Fitch Ratings Ltd. has placed $17.8 million in bonds from St. Joseph Health Services of Rhode Island on rating watch positive, due to a letter of intent signed by the hospital’s parent CharterCare Health Partners and Prospect Medical Holdings.

The $17.8 million, series 1999 bonds issued were issued by the R.I. Health and Educational Building Corp. on behalf of St. Joseph’s and are currently rated ‘CCC’ by Fitch. According to a Fitch release, the bonds are secured by a pledge of St. Joseph’s gross receipts, real estate and debt service reserve fund.

The positive rating watch reflects the recently signed joint-venture letter of intent between SJHS and for-profit California health care company Prospect Medical Holdings.

As part of the agreement, Prospect Medical intends to redeem all of St. Joseph’s outstanding debt upon finalization of the joint venture. Fitch said it expects the venture to be finalized between the organizations over the next six to nine months.

According to the Fitch report, St. Joseph’s financial profile is characterized by operating losses, “extremely low” liquidity and weak debt service coverage. “However, debt service payments continue to be paid on time,” said Fitch.

The hospital’s North Providence location also affected its rating negatively. The area is “challenged by high unemployment, stagnant population growth and below-average wealth indicators,” said the report.

The report said that the 359-bed acute care hospital has a “relatively light debt burden,” as maximum annual debt service represented 1.4 percent of total annualized revenue through January 2013.

The Fitch report closed saying it would “view positively” the completed joint-venture agreement between St. Joseph’s parent CharterCare Health Partners and Prospect Medical Holdings.

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