PROVIDENCE – Fitch Ratings Inc. downgraded Care New England’s credit rating from BBB- to BB for two bonds and the rating has been put on “rating watch evolving,” due to CNE’s recent operating losses and “weakening liquidity position.”
The two bonds are a $138.3 million R.I. Health and Educational Building Corp. hospital financing revenue bond series 2016B and a $20.3 million Care New England series 2016C.
Fitch Ratings noted that it expects to lift the rating watch if or when CNE sells Memorial Hospital of Rhode Island and/or finalizes its affiliation with Partners Healthcare of Massachusetts.
The credit rating also noted that CNE had a light debt burden, which was the company’s key credit strength.
Fitch’s outlook for CNE was positive, with the possibility for a “near breakeven bottom line performance” for fiscal 2018, though it still expects the group to post a negative operating margin.
Fitch also expects that the sale of Memorial Hospital will take place before the approval of Partners’ acquisition of CNE, noting that CNE was expected to merge with Southcoast Health System Inc. the previous fiscal year, and that did not happen.
“A positive outcome to either of these transactions would likely have a stabilizing or positive effect on the rating. Separately, an inability to stem the sizable operating losses, a debt service coverage violation in FY18, or a further drop in liquidity over the next year would likely lead to a downgrade,” the report said.
When contacted CNE spokesman Jim Beardsworth said that the Fitch report “reflects the challenges we are aggressively working to address, including significant volume shifts with associated revenue declines.
“While today’s Fitch report is an accurate representation of our current financial state, we are buoyed by the tone of optimism, along with the recognition and validation of the plans in place and the work underway to strengthen our financial stability,” Beardsworth said.
Chris Bergenheim is the PBN web editor.
