Moody's Investors Service downgraded Corinth, Miss.-based Magnolia Regional Health Center's rating to "Ba3" from "Baa3," affecting $75.8 million of rated debt.
The downgrade is a result of the health center's inability to grow liquidity, pressure on absolute cash and its breach of the debt service coverage ratio covenant in fiscal year 2017. Further, Moody's acknowledged based on the health system's finances through the first five months of fiscal year 2018, an event of default is likely to be declared. An event of default is a predefined circumstance that allows the lender of a bond to demand full repayment of a bond before it is due.
The outlook is negative, reflecting Moody's expectation that an event of default will likely occur, accelerating the rate of debt repayment.