Fitch Ratings downgraded Franklin, Tenn.-based Community Health System's issuer default rating to "C" from "CCC" after the company commenced a debt exchange offer on three series of unsecured notes due in 2019, 2020 and 2022.
Fitch views the move as a distressed debt exchange. Per Fitch's criteria, the issuer default rating was downgraded upon commencement of the offer and the IDR will be downgraded to "restricted default" upon completion of the debt exchange. The IDR will be re-rated to reflect a post-distressed debt exchange credit profile.
While the debt exchange offer will buy CHS more time to execute a turn-around plan to shore up finances and restore organic growth, the exchange does not address key credit concerns, according to Fitch. Those credit concerns include CHS's high debt burden, increasing pressure as acute-volume declines nationwide and persistently weak operating trends.
At the same time, Fitch affirmed its "B" rating on CHS's asset based lending facility, bank term loans and seniors secured notes because none of these are involved in the exchange offer.