Butler hospital authority bonds fall to 'junk' status

Financial problems continue for the former Butler Health System’s Clarion and Butler hospitals, with a national credit rating agency downgrading its bonds to junk status, indicating it has a negative outlook and would be a risky investment.

Fitch Ratings on Dec. 3 lowered the Butler County Hospital Authority’s bonds issued for the former Butler Health System from BBB- to BB+, which the rating agency considers below investment grade. The agency considers issuers of junk bonds have a greater likelihood of defaulting on repaying the bond.

Fitch cited ongoing operating pressures and a fiscal year deficit as reasons for rating decision, even as the hospital system’s finances have improved. It also violated a debt service repayment agreement with Truist Financial Corp. of Charlotte, N.C., for 2023 and 2024, Fitch said.

Butler Health, now part of Independence Health System — which includes former Excela Health hospitals in Greensburg, Latrobe and Mt. Pleasant — is seeking a forbearance agreement with its bank and bondholders that would delay repayment. Butler Health had guaranteed repayment with revenues from its operations, including the hospital, most of the system’s assets and a lien on a mortgage, Fitch stated.

The proposed agreement would prevent debt holders from foreclosing on a mortgage in return for extending the repayment until the end of 2025. The proposed deal also allows the repayment to be deferred until January 2027. Without the agreement on deferring payment, Butler Health would have to repay $45 million by June 2025.

“The Fitch Rating is straightforward and speaks for itself. In that the forbearance agreement is in the process of being finalized, we decline to comment further,” said Tom Chakurda, spokesman for Independence Health System.

Fitch did state that Butler Health’s balance sheet for its July through September quarter suggested an improving trend.