WhidbeyHealth, based in Coupeville, Wash., is facing financial challenges and needs to get a loan quickly to avoid Chapter 11 bankruptcy, according to Moody’s Investors Service.
Moody’s said March 2 that it had downgraded WhidbeyHealth’s General Tax Unlimited Obligation Bonds from “Baa3” to “Ba2” and downgraded the hospital’s General Tax Limited Obligation Bonds rating from “Ba2” to “B3”.
The rating agency gave several reasons for the downgrade, including the hospital’s serious liquidity problems. Without securing a $17 million loan or line of credit, the hospital is unlikely to be able to pay between March 18 and mid-May, when new property tax revenue from a voter-approved cover will go into effect, Moody’s said.
“Unless the hospital obtains additional cash, Moody’s believes the district is at immediate risk of becoming insolvent and filing for Chapter 11 bankruptcy,” the rating agency said.
The downgrade also reflects governance risks associated with management turnover, impaired financial reporting, delayed audits and a recent vote of no confidence by medical staff against three of the hospital’s leaders.
In February, the hospital’s board fired Ron Telles, who served as CEO and chief financial officer. The hospital appointed an interim CFO and selected HealthTechS3, a hospital management services company, to hire a permanent CEO and CFO. A HealthTechS3 contractor is expected to serve as interim CEO, according to Moody’s.