Fitch Downgrades Ty Cobb, Georgia's $17.8MM Bonds to 'B'; Rating Watch Negative.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has downgraded $17.6 million Hospital Authority of the City of Royston, GA revenue anticipation certificates (Ty Cobb Healthcare System The Ty Cobb Healthcare System began as only a single hospital. Cobb Memorial Hospital was dedicated in Royston, Georgia, on January 22, 1950, to the glory of God and in loving memory of Ty Cobb's parents, William Herschel Cobb and Amanda Cobb. , Inc. Project) series 1999 to 'B' from 'BB+'. In addition, the rating has been placed on Rating Watch Negative. The downgrade is primarily due to the continued decline in financial performance and a pending rate covenant Rate covenant A provision governing a municipal revenue project financed by a revenue bond issue, which establishes the rates to be charged users of the new facility. rate covenant violation for 2004. Ty Cobb's operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: declined to negative 9.2% (negative $6.9 million operating loss 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. ) in 2004 from negative 2.4% (negative $1.8 million operating loss). Management attributed $3.25 million of the fiscal 2004 operating loss to a write-off of bad debt expense and the remainder of the loss due to an increase in contractual allowances. Ty Cobb is expected to fall short of its debt service rate covenant of 1.2 times (x) in fiscal 2004, which will require a consultant call-in. Fiscal 2004 is the fifth year in a row Ty Cobb has had an operating loss. Ty Cobb's balance sheet indicators are extremely weak and afford the system little flexibility. At 2004, Ty Cobb had 31.4 days cash on hand and 25.3% cash to debt. Ty Cobb covenants only to disclose annual financial data to bondholders, and, to date, distribution to the nationally recognized municipal securities repositories has been sporadic. Ongoing credit concerns include Ty Cobb's poor payor mix (18.7% is Medicaid and 11.2% self pay) and physician staff shortages. Offsetting Fitch's concerns are management's intention to divest of Barrow Community Hospital (BCH BCH Beach BCH Banco Central de Honduras BCH Boot Console Handler BCH Boulder Community Hospital (Boulder, CO, USA) BCH Broadcast Channel BCH Belfast City Hospital BCH Banco Central-Hispano ), which lost $5.4 million from operations and accounted for 26.3% of total system revenues in fiscal 2004. Despite poor operating performance from Ty Cobb's other hospitals in fiscal 2004, Hart County Hospital (HCH HCH Hexachlorocyclohexane HCH Health Care for the Homeless HCH National Health Care for the Homeless Council HCH Holy Cross Hospital HCH Hypochondroplasia HCH Highline Community Hospital HCH Huntsman Cancer Hospital (Salt Lake City, UT) ) and Cobb Memorial Hospital (CMH CMH Center of Military History CMH Commission on Macroeconomics and Health CMH Chief of Military History CMH Children's Memorial Hospital CMH Ceramic Metal Halide (General Electric light source) CMH Congressional Medal of Honor ), these two facilities continue to capture approximately 70% of admissions in the service area. Inpatient discharges through the first three months ended March 31, 2005 increased 7% to 3,923 from 3,677 over the same period last year. The Rating Watch Negative indicates the potential for a downgrade of the rating over the short term and will depend on management's ability to formulate a viable strategy for the system going forward as well as further analysis of interim financial statements. Fitch also expects to review a copy of the consultant's recommendations resulting from the rate covenant violation, when they become available. Management has budgeted a negative 0.7% operating margin (negative $570,000 operating loss) in fiscal 2005. Through the three months ended March 31, 2005, Ty Cobb posted an operating loss of negative 2.1% (negative $1.2 million) and debt service coverage of maximum annual debt service of 1.1x. The Negative Outlook reflects Fitch's expectation that Ty Cobb will not meet its fiscal 2005 budget, and the challenge of improving operating performance at HCH and CMH. Additionally, while management has stated its intention to divest BCH, failure to do so could further depress operating performance and balance sheet indicators. Ty Cobb Healthcare System consists of three hospitals (210 operated beds) and three long-term care facilities (350 operated beds). The system had $75.8 million in total operating revenue in fiscal 2004. Ty Cobb has not entered into any swaps. Fitch notes that disclosure to bondholders is limited, and Ty Cobb provides information only to requesting bondholders. Fitch's rating definitions are available on the agency's public web site, www.fitchratings.com. Published ratings, criteria and methodologies and relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from this site, at all times. This document will remain on the public site for seven days. |
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