October 20, 2016: Aggressive spending on a hospital relocation has caused Moody’s Investor’s Service to downgrade the bond credit rating of Adventist HealthCare, Inc. to Baa3 from Baa2.
The credit rating agency cited $270 million in debt that the Adventist nonprofit is shouldering to relocate Washington Adventist Hospital within Maryland, from Tacoma Park to White Oak. The hospital will be closer to the General Conference headquarters of the Adventist Church.
Moody’s said that the move “added significant leverage to an already modest balance sheet and presenting construction and execution risk.”
Adventist HealthCare responded to the downgrade by saying that Moody’s had also acknowledged financial growth and performance improvement at the nonprofit.
Further, the system claimed the downgrade was anticipated during feasibility planning for the move, and low interest rates meant that issuing bonds was still a good move.
In addition to selling bonds, Adventist HealthCare will use cash equity, donated funds, contributed land and interest income to pay for the relocation.