Bangkok--1 Nov--Standard & Poor's
Standard & Poor's Ratings Services revised its rating outlook to negative from stable on Southern California Presbyterian Homes' (SCPH) and affirmed its 'BBB' long-term rating on the series 2009, 2006, and 2002 revenue bonds.
The negative outlook reflects Standard & Poor's view of SCPH's weak operating performance through the first eight-months of fiscal 2010 ended Aug. 30, and weak maximum annual debt service coverage (MADS). While year-to-date performance is better than last year, results are under budget and though the balance sheet has held up since the last review, Standard & Poor's believes it remains weak for the current rating.
More specifically, the affirmation reflects Standard & Poor's view of SCPH's improved though still negative operating income through the eight-month 2010 interim period; improved but still limited balance sheet; and several initiatives taken by management in fiscals 2009 and 2010 including the refinancing of all SCPH's variable-rate debt as well as a move toward a more conservative investment portfolio. Additional credit strengths include SCPH's considerable revenue and geographic diversity.
Partially offsetting credit factors include SCPH's weak financial performance in fiscal 2009, with continued losses through the first eight months of fiscal 2010; weak adjusted coverage of MADS; and risk of near-term operating pressure due to general economic conditions and a still-weak housing sector.
"The negative outlook reflects our assessment of SCPH's interim operating performance that is below budget and is contributing to weak adjusted coverage levels, coupled with weak balance sheet characteristics and persistent operating losses over the past several years," said Standard & Poor's credit analyst Meggi McNamara. "We believe SCPH will likely continue to improve operations and the balance sheet while maintaining occupancy levels," said Ms. McNamara.
While new management has articulated plans to enhance operating performance, future rating action will hinge on delivering improved results as projected over a sustained period, thereby strengthening the balance sheet to levels more in line with the current rating. If SCPH's were to improve operations further over the next one to two yeas while strengthening the balance sheet, particularly liquidity, a return to a stable outlook is likely. However, if losses persist or the balance sheet deteriorates further, a downgrade is likely.
RELATED CRITERIA AND RESEARCH
USPF Criteria: Senior Living, June 18, 2007
Complete ratings information is available to RatingsDirect subscribers on the Global Credit Portal at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
Media Contact:
Fabienne Alexis, New York (1) 438-7530,
[email protected]
Analyst Contacts:
Margaret McNamara, New York (1) 212-438-2007
Jessica Goldman, New York 212-438-6484