Moody’s downgraded Norman (Okla.) Regional Health System’s rating to “Caa2” from “B1.”
Five things to know:
- The lowered rating reflects that the system has no financial flexibility, with weak liquidity of 15 to 20 days cash on hand, Moody’s said in an April 9 report. Cash is entirely reliant on a fully drawn bank line, which increases the likelihood of default and a low recovery value.
- Moody’s said the system has possible additional sources of liquidity over the next month, including the sale of a business unit and the receipt of supplemental payments.
- Norman Regional’s next debt service payment of about $11.6 million is due in August, according to the report.
- Moody’s said that higher-than-expected labor costs and additional capital spending will continue to challenge Norman Regional’s margins and liquidity. The system has engaged a consultant to identify margin improvement opportunities, but Moody’s said execution is likely to take time.
- Norman Regional has a negative outlook at its new rating, reflecting the possibility of further liquidity erosion if the system’s management is unable to quickly achieve targeted margin improvements.
