Catholic Health Initiatives, CO $1.6B Bonds Downgraded To `AA-`.NEW YORK--(BUSINESS WIRE)--Oct. 29, 1999-- Catholic Health Initiatives' (CHI) approximately $1.6 billion of revenue bonds are downgraded to `AA- ` from `AA' by Fitch IBCA IBCA International Braille Chess Association IBCA Institute of Burial and Cremation Administration IBCA Integrated Business Communications Alliance IBCA International Barbeque Cookers Association IBCA Department of Interior Board of Contract Appeals . In addition, the bonds will remain on RatingAlert-negative, where they have been since July 14, 1999. The negative trend signals that the bonds may be downgraded further if CHI's financial performance does not show improvement. The downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. was caused primarily by significant declines in profitability and liquidity, fueled by losses in many of CHI's operating markets. CHI's operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. in fiscal 1999 (June 30 year-end), before restructuring expenses and impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges of $101 million, was negative $40.5 million, a decrease of nearly $200 million from fiscal 1998's $159 million. CHI's excess margin before restructuring expenses and impairment charges in fiscal 1999 was $47 million on total revenues of $5.2 billion (for an excess margin of 0.9%), compared to fiscal 1998's $347 million on total revenues of $4.8 billion (for an excess margin of 7.2%). Unrestricted cash and investments, which was $1.7 billion in fiscal 1998, declined by $214 million, or 12%, in fiscal 1999 to $1.5 billion. CHI's days' cash on hand ratio concurrently fell from fiscal 1998's 145 days to fiscal 1999's 120 days. Particularly discomforting to Fitch IBCA is the performance of CHI's individual markets. Of CHI's 55 affiliates (five of which are joint operating agreements Any contract, agreement, Joint Venture, or other arrangement entered into by two or more businesses in which the operations and the physical facilities of a failing business are merged, although each business retains its status as a separate entity in terms of profits and ), 17 posted operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. before restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of more than $1 million in fiscal 1999, including three that ranged from $22 million to $25 million. Only in 14 markets, or in 25% of CHI's markets, did CHI affiliates perform above budget. Through two months of fiscal 2000, CHI had an operating loss of $11 million and excess income of $10 million. CHI is now projecting operating income of $7 million and excess income of $115 million for fiscal year 2000. Fitch IBCA believes that many of management's corrective measures taken as a result of its performance in fiscal 1999 should improve many underperforming affiliates and therefore, overall profitability. Among the steps taken by management include streamlined reporting of affiliates to a new chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , heightened financial monitoring of its affiliates, a capital freeze program for most of its affiliates, and a number of internally performed financial and operational consultative efforts. CHI's low debt burden, with maximum annual debt service (MADS) as a percent of revenues at 2.7% in fiscal 1999 and debt to capitalization of 33.5%, remains a strength. CHI's debt service coverage of MADS was 3.2 times in fiscal 1999. Fitch IBCA will continue to monitor CHI's financial performance and its numerous improvement initiatives over the next several months. Failure to achieve the targeted results for fiscal year 2000 could result in a further downgrade. CHI, with its corporate headquarters located in Denver, is a not- for-profit Catholic health system with 70 hospitals and 49 long- term care, assisted living as·sist·ed living n. A living arrangement in which people with special needs, especially older people with disabilities, reside in a facility that provides help with everyday tasks such as bathing, dressing, and taking medication. and residential living facilities operating in 22 states. |
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