Fitch Ratings has downgraded the ratings to "BBB" from "BBB+" on Chicago-based Presence Health's following bonds:
- $91.6 million of series 2010A bonds
- $200 million of series 2009A bonds
- $51.9 million of series 2009 bonds
- $79.6 million of series 1999A bonds
- $79.6 million of series 1999B bonds
The downgrade is based on a number of factors, including Presence's unexpected operating loss of $186 million in 2015.
The ratings have been placed on rating watch negative, reflecting the likely debt service coverage violation evident in Presence's 2015 unaudited fiscal results.
Presence Health President and CEO Michael Englehart issued the following statement on the downgrade:
"We were fully prepared for a potential ratings downgrade. Well before the Fitch rating announcement, we were engaged in crafting comprehensive plans and initiating the necessary steps to decisively address our financial issues. Yes, in the short-term the bond ratings may affect the cost of future borrowings and some of our current debt, as well as create operational challenges. In the long-term however, the actions we're already taking will make us stronger and more effective as an organization going forward.
"Additionally, the 2015 financial loss, or a ratings downgrade resulting from the losses, will not affect the system's ability to pay operating expenses, including wages, supplies and bond and debt service. In fact, Presence Health continues to maintain a strong balance sheet with approximately $940 million in cash. The system's secure liquidity allows us to continue to invest in patient care and population health strategic initiatives in partnership with our affiliated physicians, joint venture partners and the communities we serve.
"Lastly, the ratings decision will not affect our ability to provide our patients, residents or customers an exceptional experience or change our fundamental mission to provide safe, quality care as we improve our financial performance. We are very optimistic about our future."