Mar 27 2010
Fitch Ratings has downgraded to 'D' from 'C' the rating on approximately
$45.5 million of bonds (listed below) issued by Valley Health System,
California (VHS).
Fitch's 'D' rating indicates default on payments to bondholders. Bond
trustee for the VHS' outstanding bonds did not make the Nov. 15, 2009
interest-only payments to bondholder due to insufficient debt service
reserve funds.
As Fitch has reported in its recent rating actions, VHS remains under
Chapter 9 bankruptcy protection (since 2007) while it attempts to
implement several ongoing turnaround initiatives. On July 27, 2009,
Valley Health System's board of directors voted to enter into an
exclusive 90-day agreement with Physicians for Healthy Hospitals (PHH; a
group of local doctors) for the potential sale of the district's assets,
including its two hospitals Hemet Valley Medical Center and Menifee
Valley Medical Center.
On Nov. 2, 2009, VHS filed its Plan for the Adjustment of Debts of
Valley Health System (Plan) with the U.S. Bankruptcy Court for the
Central District of California. Upon confirmation by the court, the Plan
provides for the sale of substantially all of the VHS' assets to PHH
and, upon closing of the sale, VHS will transfer to the Trustee a sum
sufficient to fully satisfy all outstanding principal and accrued
interest on the bonds.
Fitch will closely monitor the outcome of these negotiations and will
update the market accordingly.
VHS has the following outstanding debt:
--$4.9 million Valley Health System hospital revenue bonds (refunding
and improvements project), 1996 series A.
--$40.6 million Valley Health System certificates of participation
(refunding project), series 1993.
Applicable criteria available on Fitch's web site at www.fitchratings.com
include:
--Nonprofit Hospitals and Health Systems Rating Criteria, dated Dec. 29,
2009.
--Revenue-Supported Rating Criteria, dated Dec. 29, 2009.
www.fitchratings.com