Moody’s said March 2 that it downgraded WhidbeyHealth’s unlimited tax general obligation bonds from “Baa3” to “Ba2” and lowered the rating on the hospital’s limited tax general obligation bonds from “Ba2” to “B3.”
The credit rating agency gave several reasons for the downgrade, including the hospital’s severe liquidity challenges. Without securing a $17 million loan or line of credit, it is unlikely the hospital will be able to make payroll between March 18 and mid-May, when new property tax revenue from a voter-approved levy lid lift comes in, Moody’s said.
“Unless the hospital secures additional liquidity, Moody’s believes the district is at immediate risk of becoming insolvent and filing for Chapter 11 bankruptcy,” the credit rating agency said.
The downgrade also reflects governance risks associated with executive turnover, impaired financial reporting, delayed audits and a recent no-confidence vote by medical staff in three of the hospital’s leaders.
In February, the hospital board fired Ron Telles, who was serving as CEO and CFO. The hospital appointed an interim CFO and selected HealthTechS3, a hospital management services company, to recruit a permanent CEO and CFO. A contractor with HealthTechS3 is expected to serve as interim CEO, according to Moody’s.
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