St. Joseph Health Services rating downgraded

PROVIDENCE – Princeton, N.J.-based Standard & Poor’s has lowered its rating for certain St. Joseph Health Services of Rhode Island bonds, from BBB- to BB+, outlook negative.
Affected are the $20 million in series 1999 bonds issued by Rhode Island Health and Educational Building Corp. on behalf of St. Joseph Health Services.
The investment research firm’s announcement cited “losses in fiscal 2006 that have accelerated in fiscal year-to-date 2007,” plus the resignation of the health system’s President and CEO H. John Keimig, who left June 18 to become CEO of CEO of Quality Partners of Rhode Island (READ MORE), “which leaves St. Joseph in the position of attempting a turnaround without a permanent management team in place.”
“St. Joseph’s management and board of directors appear to be seriously considering strategies that could make a real difference for this credit,” Cynthia Keller Macdonald, an S&P credit analyst, said in a statement. “However, the process is taking a long time, and meanwhile, the credit’s financial profile has deteriorated and is more in line with a speculative-grade rating.”
For fiscal 2006, St. Joseph posted an operating loss of $1.8 million, “or a negative 1-percent operating margin, and also lost $551,000 on the bottom line, which generated slim 1.9 times coverage on all debt,” the S&P report said. “Year to date, through [the] seven months ended April 30, 2007, St. Joseph’s loss has accelerated to $2.6 million, which is $3.2 million below budget.”
Preventing a lower rating, the agency said, were St. Joseph’s low level of debt, the health system’s “adequate” liquidity and its “adequate competitive position in the state.”
The change affects about $19.98 million in rated debt, S&P said. To learn more, visit the Standard & Poor’s public Web site at www.standardandpoors.com, look under Credit Ratings in the left navigation bar, and select Find a Rating, then Credit Ratings Search.
St. Joseph Health Services of Rhode Island is a Providence-based health care system that includes the St. Joseph Hospital for Specialty Care, Our Lady of Fatima Hospital, the St. Joseph Living Center, the St. Joseph School of Nursing and the Southern New England Rehabilitation Center. Associated with but not financed by the Roman Catholic Diocese of Providence, the health system and its divisions are JCAHO-accredited. Additional information is available at www.saintjosephri.com.