OREANDA-NEWS. S&P Global Ratings lowered its long-term rating on Massachusetts Development Finance Agency's series 2013F and 2009D bonds, issued for the Southcoast Health System obligated group, to 'BBB+' from 'A-'. The outlook is negative.

"The negative outlook reflects our uncertainty about Southcoast's ability to return to profitable operations through the next two years and the negative rating impact possible if Southcoast's affiliation with Care New England is finalized," said S&P Global Ratings analyst Jennifer Soule. The pending affiliation is in the due diligence phase and also requires regulatory review, with a final determination expected by early 2017.

"The lower rating of 'BBB+' reflects our view of Southcoast's ongoing financial strain as evidenced by its uneven financial performance since fiscal 2013 and significant variance from budget through the first nine months of fiscal 2016 ended June 30, 2016," added Ms. Soule.

We could lower the rating on Southcoast if it formalizes its affiliation with Care New England (CNE), given CNE's significantly weaker credit quality. If the affiliation does not come to fruition, we could still lower our ratings on Southcoast to 'BBB' if it reports significant operating losses through the two-year outlook period and significant balance sheet erosion would also be given negative consideration.

We could revise the outlook to stable if our view of the Southcoast and CNE affiliation results in a 'bbb+' assessment for the GCP. If Southcoast does not move forward with the CNE affiliation we could revise the outlook to stable if Southcoast meets its projected breakeven budget for fiscal 2016 and its budget for fiscal 2017. We do not think a higher rating is likely for Southcoast given its current operating challenges and pending affiliation.

Southcoast Health System includes three hospitals: St. Luke's Hospital in New Bedford, Charlton Memorial Hospital in Fall River, and Tobey Hospital in Wareham. Southcoast is defined as a health system given its total operating revenue in excess of $750 million and its three hospitals spread across three distinct locations in southern Massachusetts.