S&P Global Ratings lowered the rating on Tewksbury, Mass.-based Covenant Health's bonds to "BBB+" from "A-."
"The lower rating reflects CH's weak financial performance since fiscal [year] 2012, specifically its operating losses reported for fiscal years 2015 and 2016 that were greater than anticipated in each fiscal year," said S&P analyst Jennifer Soule. She also attributed the downgrade to a "reduced balance sheet flexibility with the addition of $75 million in unrated private placement and bank debt issued in March 2017 that put some strain on its debt metrics and our uncertainty about CH's ability to achieve profitable operations by the close of fiscal [year] 2017."
The outlook is stable, reflecting S&P Global Ratings' expectation Covenant Health will continue its financial recovery efforts and will shift its management, governance and strategy to an integrated systems approach.