Ryder Memorial Hospital, PR, 1994A Bonds Downgraded To 'CCC' From 'CCC+' After Bond Covenant Violation


CENTENNIAL (S&P Global Ratings) March 14, 2019--S&P Global Ratings lowered its 
ratings on Puerto Rico Industrial Medical & Higher Education & Environmental 
Pollution Control Facilities Finance Authority's series 1994A bonds, issued 
for Ryder Memorial Hospital, to 'CCC' from 'CCC+'. The outlook is stable. 

"The downgrade reflects Ryder's violation of financial covenants; specifically 
covenants on debt service coverage, debt service ratio, and financial 
statement disclosure," said S&P Global Ratings credit analyst Chloe Pickett. 
While Ryder is seeking waivers for the covenant violations, it could default 
if it doesn't receive these. We do not have additional information on approval 
or timing and will reassess the situation when details become clear.  

The rating reflects Ryder's weakened operating and financial profiles and 
ongoing uncertainty related to the hospital's ability to return to full 
operations following the devastating impact of Hurricane Maria in September 
2017. Although Ryder has reopened with limited offerings, a large portion of 
the hospital remains closed with extensive repairs still needed. Ryder 
initially paid debt service through its debt service reserve fund after the 
hurricane, but is paying through operations and has not indicated future 
payment issues. "We believe, however, that Ryder is vulnerable to default 
given the catastrophic damage to the hospital's operations and cash flow, 
combined with the very limited liquidity," Ms. Pickett added. 

Ryder's operating profile includes a dominant market as the main hospital 
share across a large, rural primary service area. It is in Humacao, one of the 
areas most affected by Maria. Management indicated a slow, but improving, 
recovery in the area with the full restoration of water and electricity, and 
businesses set to reopen in coming months.

The stable outlook reflects our view of Ryder's expected resumption of many 
inpatient services within the one-year outlook period. The outlook also 
reflects our expectation that the hospital will continue to pay its debt 
service from operations. We continue to believe insurance proceeds, including 
funds from the Federal Emergency Management Agency (FEMA), will continue 
boosting cash flow, although the timing of payments is uncertain. 

We could lower the rating if Ryder cannot pay its upcoming debt service 
payments or if bondholders do not agree to waivers for financial covenant 
violations and determine Ryder to be in default. In addition, diminished 
liquidity could result in a negative outlook or downgrade.

While unexpected during the outlook period, we could revise the outlook to 
positive or raise the rating if Ryder dramatically increases volumes with the 
reopening of services and significantly improves financial performance.

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