Franklin, Tenn.-based Community Health Systems and Dallas-based Tenet Healthcare both received credit downgrades in the past week.
On Monday, Moody's Investors Service downgraded the corporate family rating of CHS to "B2" from "B1." Dean Diaz, Moody's senior vice president, said, "The downgrade of Community's corporate family rating to B2 reflects our expectation that financial leverage will remain high with debt to EBITDA above 5.5 times over the near term and that deleveraging to acceptable levels will take longer than anticipated."
The credit rating agency downgraded CHS' unsecured notes to "Caa1" — a rating that reflects substantial risks.
Tenet was also downgraded in the past week. Moody's downgraded Tenet's corporate family rating to "B2" from "B1." The for-profit hospital operator's unsecured notes were downgraded to "Caa1." Moody's said the lower ratings reflect the credit rating agency's expectation that Tenet's debt to EBITDA less distributions to minority interests will likely remain about 6.0 times over the next 12 months.
However, not all major for-profit hospitals are getting downgraded. Moody's affirmed King of Prussia, Pa.-based Universal Health Services' "Ba1" long-term rating this month. "Baa1" is the first rung in junk bond status.
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