Bangkok--27 Feb--Standard & Poor's
Standard & Poor's Ratings Services today affirmed its 'BB' long-term rating and negative outlook on the City of La Verne, Calif.'s $45.51 million of debt, issued for Brethren Hillcrest Homes (Hillcrest).
Standard & Poor's based its rating affirmation and continuing negative outlook on its view of the recent improvement in management, firmer demand, and 2.0x adjusted debt service coverage for fiscal year ended June 30, 2008, which we deem adequate. In our opinion, these credit strengths are offset by a weak balance sheet with high leverage and very modest liquidity. Also contributing to the negative outlook is the current severe recession that we believe is making Hillcrest's turnaround plans more difficult to implement in a timely manner.
Management recently initiated a corrective action plan that included staff reductions and other means of boosting revenue and reducing cost to preserve and enhance cash flow and liquidity. Management also expects a stronger second half of fiscal 2009 and the full-year budget demonstrates a slightly better than breakeven year with further improvement expected in 2010.
The outlook remains negative due to the ongoing liquidity pressure Hillcrest faces, despite recent indications that demand is firming up a bit and cash flow is improving because of the positive actions being taken by the new management team.
"Any consideration of a higher rating would be predicated upon attainment of firmer occupancy levels, stabilization of financial results, and improved liquidity," said Standard & Poor's credit analyst Kenneth Rodgers. "A lower rating is possible, in our opinion, if losses escalate and cash declines from present levels or if debt increases materially, although we do not expect the latter to occur," said Mr. Rodgers.
Hillcrest operates a continuing-care retirement facility that currently has 232 independent-living units, 72 assisted-living units (including a 24-bed dementia facility), and 74 skilled-nursing-facility beds (although it is licensed for 79). The campus is located on 53 acres in La Verne, Calif. approximately 30 miles east of Los Angeles.
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Media Contact:
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contacts:
Kenneth W Rodgers, New York (1) 212-438-2087
Jennifer Soule, Boston (1) 617-530-8313
Key Contacts:
Americas Media Relations: (1) 212-438-6667
media_ [email protected]
Americas Customer Service: (1) 212-438-7280
[email protected]