Moody’s report confirms better cash position for Sparks Health System
by July 7, 2009 6:36 am 52 views
A June 11 opinion from Moody’s Investors Service supports the statement from Sparks Health System CEO Ted Woodrell that the troubled hospital’s finances are improving.
Woodrell said in a July 2 interview with The City Wire that the large regional hospital once considered headed to bankruptcy was beginning to see positive cash flow.
“Our operations have improved so much that we don’t have to do a deal now. That’s really the great news. With the volumes that we have and the cash flow we have, we have options today that a year ago we didn’t have. That’s a very comforting thing,” Woodrell said.
Moody’s notes in its recent opinion that the hospital’s “consolidated operations demonstrate modest improvement” compared to the previous fiscal year. More importantly, Moody’s reported that Sparks cash holdings increased to $11.4 million at April 30, up from the $7.5 million in cash as of Dec. 31. Moody’s said the increase may include $2 million borrowed from the Sparks Foundation.
Moody’s issued the brief opinion following the Sparks announcement it was withdrawing from the effort to sell the hospital to Alpharetta, Ga.-based Jackson Healthcare.
Woodrell said July 2 that the improved financial condition now meant Sparks is not forced to seek a buyer or financial partner.
OPINION FROM MOODY’S
NEW YORK, Jun 11, 2009 — Moody’s Investors Service will not take immediate rating action on the Caa1 rating assigned to Sparks Regional Medical Center’s (Sparks) Series 2001 fixed rate bonds ($53.1 million outstanding) following the recent announcement that Sparks and for-profit Jackson Healthcare (headquartered in Alpharetta, GA) have discontinued negotiations for Jackson to acquire Sparks. The two
parties signed a non-binding Letter of Intent in March 2009.
At this time, it is unclear what Sparks’ course of action will be. We note that through April 30 (ten months of FY 2009), consolidated operations demonstrate modest improvement compared to the first two quarters of FY 2009. Operating cash flow is slightly positive for the first ten months of the year (0.1% operating cash flow margin) compared to -$4.3 million through six months of FY 2009 (-3.5% margin). Unrestricted cash (including $2 million that may be borrowed from the foundation) increased to $11.4 million at April 30, 2009, translating into approximately 16 days cash on hand (liquidity measures $9.4 million and 13 days cash on hand when excluding the foundation money). These compare to $7.5 million of cash and 11 days cash on hand through six months FY 2009 (December 31, 2008).
Sparks continues to make its regularly scheduled principal and interest payments and the debt service reserve fund remains fully funded.