Downgrades pound Texas hospital district deeper into junk

Continued weak finances led to multi-notch rating downgrades to junk levels for a Texas hospital district that is planning a bond sale, according to rating agencies.

Moody's Ratings lowered Hunt Memorial Hospital District's rating to Ba3 from Ba1 on Aug. 11 and S&P Global Ratings on Aug. 4 dropped its rating to B-plus from BBB-minus, with both giving the district a negative outlook.

While the district issues general obligation bonds backed by property taxes, it has violated bond covenants on privately placed revenue debt, the rating agencies said.

"The downgrade to Ba3 reflects the continued distressed financial position in fiscal 2025, leading to negative operating margins and extremely narrow liquidity as leverage continues to increase," Moody's said in a report, adding the negative outlook "underscores the uncertainty regarding a return to stable financial metrics."

Based on current financial projections the district's days cash on hand could potentially drop to four or five days at the end of September from under 15 days presently, the report added.

S&P cited the district's "extremely thin balance sheet, with very weak unrestricted reserves and high pro forma leverage, coupled with sustained operating losses," as well as an increased reliance on external financing for maintaining working capital.

The downgraded ratings and negative outlooks were assigned to an upcoming $29.3 million GO bond sale by the district, which operates Hunt Regional Medical Center in Greenville northeast of Dallas and other facilities in Hunt County.

A district spokesperson did not immediately respond to requests for comment about the rating actions and for information about the debt sale.

The district had $49.58 million of bonds and $7.619 million of notes outstanding as of Sept. 30, according to its latest annual financial report. It last sold general obligation bonds in 2020: a $27.9 million deal.