NEW YORK--(BUSINESS WIRE)-- As part of its continuous surveillance process, Fitch Ratings has affirmed the rating on the following bonds issued on behalf of Ty Cobb Healthcare System (Ty Cobb), at 'BB-':
--$12.5 million Hospital Authority of the City of Royston revenue anticipation certificates, series 1999.
The Rating Outlook is Stable.
RATING RATIONALE:
--Supporting the 'BB-' rating is Ty Cobb's favorable liquidity position of $32.3 million of unrestricted cash and investments, which equates to 221.5 days cash on hand (DCOH), a 17.1 times (x) cushion ratio, and 139.2% cash to debt. Fitch views Ty Cobb's balance sheet as the borrower's primary credit strength.
--Fitch's primary credit concerns include Ty Cobb's deteriorating financial performance, declining patient volumes in a weak service area, and poor historical debt service coverage.
--Ty Cobb's progress in consolidating the organization's services into one facility is a positive rating factor; however, the new facility is not expected to open until the spring of 2012.
--Located in northeast Georgia and operating in Hart and Franklin counties, Ty Cobb's two facilities have a high percentage of revenue coming from governmental payors and self-pay, which Fitch views unfavorably. Additionally, the service area is hampered by high unemployment and below average socioeconomic indicators compared against state and national averages.
KEY RATING DRIVERS:
--Continued negative operating performance and significant decline in liquidity indicators may cause negative rating pressure.
--Hospital consolidation of acute care services is viewed positively by Fitch but current utilization trends signal outmigration, which continues to pressure operations.
SECURITY:
The bonds are secured by a pledge of gross revenues, property, and equipment.
CREDIT SUMMARY:
The rating affirmation at 'BB-' is based primarily on Ty Cobb's strong balance sheet and solid market position in the primary service area. An additional credit positive is management's plan to eventually move into a new hospital located in Lavonia, GA. Credit concerns include the organization's continued poor operating performance, declining patient utilization trends, lack of capital investment at the organization's current facilities, and weak historical debt service coverage.
Ty Cobb's balance sheet remains very strong as the system had 221.5 DCOH, a 17.1x cushion ratio, and 139.2% cash to debt through December 2010. Fitch also views favorably the fact that management will eventually be consolidating acute care hospital operations once the new hospital opens, which is expected in the spring of 2012. However, management noted that construction for the new facility was impacted due to unfavorable winter weather, but is confident that the facility will open on time.
At Dec. 31, 2010 (unaudited), Ty Cobb recorded a $5.3 million loss from operations and lost $1.8 million in operating EBIDTA cash flow, which translated into a negative 9.3% operating margin and negative 3.2% operating EBITDA margin. Both measures compare unfavorably against Fitch's 'BB' rated peer group. The operating losses continue to be driven by weak patient utilization, which is impacted by patient outmigration and the poor performing economy in Ty Cobb's service area. With the lack of financial resources, management has not made any significant capital investments in either of the organization's two acute care facilities over the past two fiscal years and has no plans to do so with the new hospital construction. While Fitch understands the rationale behind the lack of recent capital investment Fitch would expect the lack of capital investment to have a negative impact on patient utilization if new hospital construction is further delayed.
The Stable Outlook is primarily due to Ty Cobb's strong balance sheet for the rating level. Any significant deterioration to liquidity metrics may cause negative rating pressure. However, management has indicated to Fitch the intention to redeem the remainder of the series 1999 bonds in July 2011. Fitch will continue to monitor the bonds and take appropriate action as necessary.
Ty Cobb Healthcare System consists of two hospitals (153 operated beds) and three long-term care facilities (350 operated beds). The two hospitals hold a dominant inpatient market share of approximately 65%-68% of admissions in the service area. In 2010 (unaudited) the system had $58.2 million in total operating revenue.
DISCLOSURE: There is no covenant to regularly disseminate disclosure information in their bonds documents, but management does disclose to EMMA on a quarterly and year-end basis.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Revenue-Supported Rating Criteria', dated Oct. 8, 2010;
--'Nonprofit Hospitals and Health Systems Rating Criteria', dated Dec. 29, 2009.
For information on Build America Bonds, visit 'www.fitchratings.com/BABs'.
Applicable Criteria and Related Research:
Nonprofit Hospitals and Health Systems Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493186
Revenue-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564565
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
CONTACT:
Fitch Ratings
Cindy Stoller, +1-212-908-0526
Media Relations, New York
[email protected]
or
Primary Analyst:
Michael Burger, +1-212-908-0555
Associate Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst:
Carolyn Tain, +1-415-732-7576
Senior Director
or
Committee Chairperson:
Jim LeBuhn, +1-312-368-2059
Senior Director
KEYWORDS: United States North America Georgia New York
INDUSTRY KEYWORDS: Health Hospitals Professional Services Finance
MEDIA: