by James C. Sherlock
One thing I watch about companies in industries I cover is the ratings and outlooks on their credit.
In my experience, the SEC’S three largest nationally recognized statistical rating organizations (NRSROs), Moody’s, S&P, and Fitch, tend to know as much about company finances as their boards do.
I recently wrote about management and staffing issues at Sovah Health hospitals in Danville and Martinsburg. Both are owned by privately held LifePoint Health, headquartered in Tennessee.
Lifepoint also owns in Virginia:
- Fauquier Hospital;
- Clinch Valley Medical Center;
- Twin County Regional Hospital; and
- Wythe County Community Hospital.
The rating agencies are not in love with LifePoint’s credit.
Yes, it matters.
S&P Global Ratings affirmed the B credit rating of LifePoint Health long term debt on January 10, 2023.
The S&P outlook on that debt is negative.
Moody’s rates LifePoint B2 with the outlook also assessed as negative. In Moody’s rating system, B2 is the second level of “speculative” and the second level of “subject to high credit risk.”
Moody’s assessed in March that the global speculative-grade corporate default rate will rise to 4.6% by January 2024. Firms with negative outlooks on their ratings are more likely than the rest to be part of that 4.6%.
By contrast, Sentara, Inova, Valley Health, HCA, and Carilion are all rated investment grade with stable outlooks.
Bottom line. There is always a market for speculative debt, even with a negative outlook, but LifePoint Health is discovering the very high costs.
It is a situation with a bearing on those six Virginia hospitals.
Financial issues signaled by the speculative rating on its credit and, separately, LifePoint staffing shortfalls in Virginia discussed in my earlier article show a need for additional oversight of those hospitals.
When corporations get into financial and staffing trouble, they must make their own way out of it.
But the regulator of LifePoint’s Virginia hospitals, the Virginia Department of Health, must step up to ensure patient safety while that company attempts to do so.