Tower Health's financial condition called 'precarious' in credit downgrade to 'junk' status
Two major credit-ratings agencies slammed Tower Health with downgrades to “junk” bond status Friday, declaring that the nonprofit owner of seven Philadelphia-area hospitals is in “precarious financial position” and “faces a difficult path to recovery.”
The downgrades by Standard & Poor’s and Fitch Ratings came after more than $550 million in operating losses during the two years that ended June 30 and a rapid deterioration of Tower’s finances. Unrestricted financial reserves are down by $240 million, or 25%, over the last two years. Losses are expected again in the fiscal year ending next June.
“While we understand that management has initiatives underway to improve operations, we believe the magnitude of the losses creates a difficult path to recovery, particularly given that volumes are not yet at pre-pandemic levels,” S&P said in its report, which gave Tower a “BB+” rating, down three notches. BB+ is the highest speculative rating, also called junk bonds.
Tower made a risky expansion — the debt-fueled acquisition three years ago of five community hospitals in Southeastern Pennsylvania — and that was compounded when the coronavirus pandemic hammered health systems' finances.
Read more: https://www.inquirer.com/business/health/tower-health-losses-credit-downgrades-covid-19-sp-fitch-20201031.html