More hospitals expected to default on credit agreements, Moody's says

Sharp declines in revenue and cash flow caused by the suspension of elective services will mean more hospitals could default on their credit agreements in 2020 than in previous years, according to a May 28 report from Moody's Investors Service. 

How a default, or a covenant breach, on a borrower's credit will affect hospitals will vary depending on several factors. Some factors include whether the breach occurred in conjunction with fundamental operating issues and the likelihood that the agreement violation will trigger an event of default and accelerated debt payment.

Moody's said federal stimulus grant distributions that aim to support hospitals that have seen their revenues plummet will help mitigate the risk of a default on credit agreements. 

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