Care New England Takes Another Hit, S&P Downgrades Bonds
Tuesday, October 24, 2017
Care New England (CNE), one of Rhode Island’s largest private employers with more than 5,000 employees, has taken another financial blow.
Last week, Prime HealthCare walked away from the deal to purchase Memorial Hospital. Then, the Board of CNE voted to close Memorial impacting over 800 employees.
Now, S&P Global Ratings has lowered CNE’s rating to 'BB-' from 'BB' on debt issued by the Rhode Island Health & Educational Building Corp. (RIHEBC) for Care New England Health System (CNE). S&P has warned investors and deemed CNE’s outlook as negative.
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“The negative outlook reflects uncertainties related to CNE's ability to achieve its financial targets for fiscal 2018 and close Memorial in a timely and cost-effective manner, along with its continued challenge formalizing a strategic partnership with another health care provider. Our outlook currently covers a period of one year,” wrote S&P.
Impact of Partners Deal?
The impact of the downgrade on the now pending sale to Partners HealthCare in Boston is unknown. Partners is the proverbial 800-pound healthcare gorilla in New England as the company has more 70,000 employees and an annual budget in excess of $12 billion.
S&P went on to write, “We could consider a lower rating if CNE does not significantly improve its financial performance through the outlook period. We do not think the system's balance sheet has any flexibility given its current operating challenges--any further draw on its unrestricted reserves or addition of debt would be given negative consideration that could lead to a lower rating.”
Partners merger could help stabilize CNE, “If the current CNE and Partners negotiation does lead to a definitive agreement, we could factor some of the benefits of that relationship into our outlook for CNE's credit profile, although we would not factor the full benefit of that credit boost into the rating on CNE until the relationship has been fully evaluated by regulators, is approved, and penned as final. We will continue to evaluate the timing and terms of this relationship as it unfolds.”
Recently, Partners refused to comment on the status of its relationship with CNE.
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