CARTI bonds’ ratings reduced

Move puts $49M into junk status

Fitch Ratings, an international bond rating service, has downgraded the rating on revenue bonds for CARTI, which offers outpatient cancer treatment in Arkansas.

Fitch lowered CARTI’s rating from BBB-, an investment grade bond, to BB+, considered to be junk bond status.

The $49 million in bonds issued by CARTI were initially rated BBB+ in 2013.

CARTI is a leader in outpatient cancer services in Little Rock and the surrounding market, Fitch said. It also has satellite sites around the state.

The downgrade to BB+ reflects CARTI’s consecutive years of missed operating targets, as recently as fiscal year 2017. The latter is based on unaudited results through June 30, said senior directors and analysts Kevin Holloran and Eva Thein in Fitch’s report.

“Losses were driven in part by early volume volatility, added expenses associated with new oncological therapies and also some expenses related to an ac-

● counts receivable writedown and the added expenses associated with a management consultant,” the two analysts said.

CARTI began work on its $90 million cancer center in west Little Rock in 2013 and opened it in November 2015.

Adam Head, who took over this week as CARTI’s chief executive officer, said he was disappointed to receive the downgrade.

“But I am encouraged by the progress the organization

has made over the past six months,” Head said in a prepared statement. “Although we rolled out the initiatives put into place by our management consultant firm, Berkeley Research Group, in early spring, much of the savings that were identified won’t be fully realized until this new fiscal year.”

CARTI is still waiting on the audited financial results for the fiscal year, Head said.

“We fully expect that we will meet the required minimum debt service coverage ratio … required for the bond,” Head said.

Fitch also anticipates that CARTI will meet the debt

service ratio, the analysts said.

“However this is largely driven by nonoperating income gains and operating improvement that will be necessary to sustain adequate debt service coverage over the longer term,” Fitch said.

Head said he has been impressed by the commitment of CARTI’s physicians and team.

“Despite the present challenges that exist, the team is wholeheartedly dedicated to ensuring CARTI can continue to fulfill our mission of caring for our cancer patients,” Head said.