Philadelphia Authority for Industrial Development Ratings Lowered One Notch On Performance Decline; Outlook Negative

CENTENNIAL (S&P Global Ratings) Aug. 26, 2019--S&P Global Ratings lowered its long-term ratings one notch to 'BB+ (sf)' and 'BB (sf)' from 'BBB- (sf)' and 'BB+ (sf)' on Philadelphia Authority for Industrial Development's series 2016A and subordinate 2016B senior housing revenue bonds (The Pavilion). At the same time, S&P Global Ratings removed the ratings from CreditWatch, where they had been placed with negative implication on July 25, 2019. The outlook is negative.
"The downgrades follow our revised view of the strategy and management to highly vulnerable from vulnerable, owing to deterioration in the track record and operational effectiveness, as demonstrated by recent cash flow volatility and technical defaults, at other projects under the same parent-ownership and management structure," said S&P Global Ratings credit analyst Daniel Pulter. Under our criteria, the rating is capped at 'BB+' in accordance with our highly vulnerable strategy and management assessment. Our view of owner JPC Charities, and PF Holdings LLC as manager, is also informed by repeated difficulty in obtaining critical fiscal 2018 financial information for several projects under the same parent-ownership and management structure. We have found that difficulty in gathering critical and required information related to a project typically proceeds financial and operational performance declines.
"Additionally, the outlook reflects our expectation that the project's financial position may deteriorate further in 2019 if expenses are not managed, and if sharp year-over-year increases occur similar to 2018," Mr. Pulter added. "Accordingly, we assess at least a one-in-three likelihood of a downgrade within the one-year outlook period."
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