Moody's Investors Service downgraded Oceanside, N.Y.-based South Nassau Communities Hospital's bonds to "A3" from "Baa1," affecting $77 million of debt.
Simultaneously, Moody's assigned its "Baa1" rating to SNCH's proposed $90 million series 2018 bonds.
The downgrade and assignment are a result of several factors, including the hospital's increasing leverage, weak operating margins, increasingly competitive market and upcoming period of high capital spending. Moody's also acknowledged the hospital's declining debt burden, solid revenue growth and access to federal grants to support capital projects. Additionally, Moody's acknowledged the hospital's plan to affiliate with New York City-based Mount Sinai Health System as a favorable credit strength, but notes failure to close an affiliation will impair the hospital's ability to remain competitive.
The outlook is stable, reflecting Moody's expectation that the hospital will see improved margins in fiscal year 2018 even before affiliating with Mount Sinai.