TOLEDO, Ohio — Fitch Ratings - one of three main ratings agencies - again downgraded ProMedica's credit rating this week as the Toledo-based healthcare company continues to navigate major financial problems.
Fitch downgraded ProMedica's Long-Term Issuer Default Rating Tuesday from BB+ to BB-. The agency also downgraded $1.8 billion in bonds issued by various entities on behalf of ProMedica to the same grade, and placed its ratings on "watch negative."
This is the second time Fitch has downgraded ProMedica's credit since last May. Tuesday's revision came weeks after the company announced about $350 million in losses during the fourth quarter of last year.
"The 'BB-' rating reflects the precipitous decline in liquidity in fiscal [year] 2022, which has placed significant pressure on an already weak balance sheet and leaves the organization with very little flexibility should management's financial improvement plan not materialize fully," Fitch stated in its guidance. "The 'BB-' rating also reflects Fitch's concern related to the retained senior care business. While this division was reduced drastically following the divestures of the skilled nursing facilities (SNF) in FY22, the remaining assisted living and memory care facilities have historically been a drain on operations and are expected to continue to generate operating losses."
The guidance went on to say the negative watch reflects the "uncertainty" regarding the $710 million sale of its hospice and home healthcare business to Gentiva since the sale has not received all the necessary approvals yet from regulators. According to Fitch, ProMedica plans to use money from the sale to pay down roughly $452 million of certain debts.
"Fitch views management's willingness to monetize assets favorably and ultimately views the sale of the Welltower SNF and pending sale of the hospice and home health division as a credit positive," the guidance stated. "Nevertheless, Fitch believes that ProMedica remains in a precarious position given its very thin liquidity, uncertainty of the current operating environment and risks related to certain financial covenants."
Also on Tuesday, credit rating agency Moody's affirmed its previous negative outlook of Ba2. The agency believes ProMedica will continue to face risks this year and said "combined operating cashflow will be minimal in fiscal 2023."
ProMedica spokeswoman Tausha Moore issued the following statement:
“Both Fitch and Moody’s credit rating agencies reviewed ProMedica’s bond ratings and issued updated opinions this week. We are pleased that Moody’s reaffirmed ProMedica’s current bond rating, noting our efforts to address financial losses and facilitate the ongoing recovery of our well-positioned provider business. We remain confident in our strategic plan and optimistic about the long-term prospects for creating a more stable and sustainable organization.”
ProMedica is in the midst of significant restructuring and refocusing as it continues to navigate major financial problems. The effects of those issues have been felt this year in the region.
In recent weeks, the company asked Lucas County for a friendlier agreement for naming rights to the Glass City Center, suspended a $10 million donation to the Metroparks and $60,000 for Jeep Fest and also terminated a 10-year sponsorship agreement with the USGA for the U.S. Women's Open barely a year into the deal.
In March, ProMedica asked the city of Toledo and the county for more money to stage fewer shows for this year's summer concert series.
Nearly 300 people were laid off after the company divested from skilled nursing facilities earlier this year. 262 were announced in the first wave before 26 more in the second.
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