Downgrade may affect some more than others
Hospitals watch, wait on interest rates
Not-for-profit healthcare bonds escaped the kind of abrupt and costly upheaval seen in 2008 in the week that followed one major ratings agency’s downgrade of U.S. credit. The nation’s credit strength—no longer seen unanimously as sterling, with Standard & Poor’s breaking from the other two major agencies to notch its rating down to AA+ from AAA—has long been used to guarantee debt for small and rural hospitals. More recently, it has provided backing for hospital bonds with credit guarantees from faltering commercial banks. And hospitals that refinance bonds to take advantage of lower interest rates typically buy U.S. Treasuries when prior investors must be paid back gradually.
But Standard & Poor’s downward-revised view of U.S. credit, based on the agency’s “pessimistic” view of political wrangling that has mired fiscal policymaking, mattered little to most healthcare borrowers that rely on federal credit guarantees, said industry executives. Future borrowers, however, could see slightly higher interest rates because of the country’s split rating, they said.
Nonetheless, a few hospitals and health systems could see interest rates creep upward immediately. Most Federal Home Loan Banks, which guarantee a small number of hospital short-term bonds, also were downgraded to AA+ by Standard & Poor’s.
In 2008, Congress temporarily allowed the Federal Home Loan Banks to extend additional