Standard and Poor's Ratings Services has revised its rating outlook for Roseville, Calif.-based Adventist Health to negative from stable.
S&P has also affirmed the "A" long-term rating and underlying rating on outstanding tax-exempt and taxable bonds issued on behalf of the system. Additionally, S&P assigned an "A" long-term rating, with a negative outlook, to the California Statewide Communities Development Authority's $181.7 million series 2015A revenue bonds, issued on behalf of Adventist Health, and affirmed the "AAA/A-1+" rating on the series 2009B bonds issued for Adventist Health.
Here are three things to know about the negative outlook.
1. The downgraded outlook reflects S&P's view of Adventist Health's "persistently thin days cash on hand and unrestricted reserves to debt, the latter of which weakens incrementally from the added debt associated with the 2015 plan of finance, but also with debt guaranteed as part of a recent hospital addition to the system," S&P credit analyst Kenneth Gacka said in a news release. As of June 1, 2015, Lodi (Calif.) Health became part of Adventist Health.
2. More specifically, the "A" ratings and negative outlook reflects S&P's view of
Adventist Health's high pro forma leverage, as well as pro forma unrestricted reserves metrics that are weak for the rating.
3. The ratings and outlook also reflects S&P's view of Adventist Health's challenging payer mix that is susceptible to governmental pressures.
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