Tower Health gets another credit rating downgrade from Fitch, to CCC
Fitch called Tower's cash reserves "precipitously weak" relative to its $1.6 billion in debt.
Fitch Ratings downgraded Tower Health’s credit rating to “CCC,” one of the agency’s lowest ratings, citing its continued operating losses in the year that ended June 30, and extraordinarily low cash reserves relative to long-term debt.
The nonprofit health system anchored by Reading Hospital in Berks County has had operating losses for six years in a row, including $1 billion in losses during the last four years, Fitch said.
Tower owns Phoenixville Hospital and Pottstown Hospital. In a 50-50 joint venture with Drexel University, it owns St. Christopher’s Hospital for Children in Philadelphia.
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Its cash reserves have fallen to $208 million, while its debt stands at $1.6 billion, according to Fitch. That means its unrestricted reserves amount to just 13% of its debt. Fitch called that “precipitously weak.” By contrast, Temple University Health System reported Wednesday that its cash reserves amounted to 218% of its debt at the end of June.
Tower’s low cash reserves and large debt load mean that its ability to invest in its facilities is extremely limited, effectively only fixing things that break, Fitch said. Long-term, that would make it increasingly difficult to attract patients.
» READ MORE: Temple University Health System reported a $64 million annual operating loss, its first since 2014
Fitch noted, however, that Tower had improved financial performance from April through June.
Tower said in a statement Wednesday that financial results over the summer were encouraging. “We are optimistic about maintaining this upward momentum,” Tower said.