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Children’s Bankruptcy Puts “Negative Watch” On UMC’s Bond Rating

County officials are concerned the County Hospital District’s bond rating could be downgraded once again due to the El Paso Children’s Hospital’s bankruptcy case.

The County Hospital District controls University Medical Center. ABC-7 confirmed credit agency Standard and Poor put the hospital district on a negative rating watch on May 21st because of the uncertainty revolving the Children’s Hospital bankruptcy case.

“It does demonstrate is that the instability is being watched outside of El Paso,” said County Judge Veronica Escobar.

In August 2014, rating agency Fitch downgraded UMC’s bond rating from AA to AA- and changed it’s outlook from “stable” to “negative.” Then in December 2014, Standard and Poor also downgraded UMC from AA- to an A+ with a negative outlook, citing the financial uncertainly with the Children’s hospital.

A lower credit rating would force UMC to pay higher interest if it were to refinance its debt or borrow more money for capital projects.

“If UMC needs to upgrade a floor or address any facilities deficiencies and they don’t have the cash — and they don’t have the cash because its been lent to Children’s — their only option would be bonds and the bonds might not be a feasible option because of what Children’s did,” said Escobar.

County Commissioner said the El Paso Children’s Hospital has gone from a partner and asset to UMC to a liability.

“When they (UMC) have to borrow money it’s in large quantities and so it can be up to millions of dollars that taxpayers would have to pay extra because of the fact that the interest rate is higher,” said Stout.

“What this (the Children’s) board decided to do is having a massive ripple effect,” said Escobar.

Children’s Hospital board members have refused to answer qustions regarding the bankruptcy, which they authorized in February but did not notify UMC until May.

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