Standard & Poor’s has withdrawn its junk bond rating on Palm Drive Health Care District’s parcel tax revenue debt after the district failed to provide timely information requested by the credit rating agency.
In a report issued Aug. 13, S&P said it was pulling its BB rating for the district’s 2005 parcel tax revenue bonds and 2010 certificates of participation, or COPs, a total debt of about $23 million.
The move comes at a time when the district is about to help launch the Sonoma West Medical Center, a retooled version of Palm Drive Hospital, which closed its doors 16 months ago.
District officials admit that S&P’s actions were the result of “inconsistent leadership” resulting from the departure in June of the district’s executive director Daymon Doss. A new executive director was hired last week, the district said.
“The district really needs solid and consistent leadership and we finally got it,” said Sandra Bodley, secretary of the Palm Drive Health Care District.
Bodley said steps are being taken to have the district’s bond rating reinstated. She said district board president Jim Maresca, who runs a financial management business, temporarily filled in after Doss’s departure.
Bodley said an S&P analyst contacted the district several times in the spring requesting information related to the district’s bond rating. S&P warned the district in late July that it had placed its bond rating on CreditWatch, a status often used when S&P is considering lowering credit ratings. A BB rating is considered of low credit quality, a risky investment that means a higher interest rate for the borrower.
Bodley said Geni Houston, the person in charge of the district’s accounting and bookkeeping, contacted S&P on July 31 and attempted to respond to the credit rating agency’s questions. Houston mistakenly thought she had addressed all of S&P’s inquiries, Bodley said.
“We thought everything was cleared up then,” she said.
Bodley said that Houston again contacted S&P staff this week and made it clear that the district wasn’t “trying to dodge anything. The first two rounds of messages didn’t get to anyone.”
Bodley said the district is working closely with S&P and the agency assured the district that its bond rating would be reinstated within the next two weeks.
David Hitchcock, senior director of U.S. public finance at S&P in New York City, said the agency could not comment on the credit quality of the district’s bonds.
“When we don’t have enough information to assess credit quality we withdraw the rating,” he said.
Wells Fargo is the trustee of the district’s bonds and certificates, representing bond holders. Jen Hibbard, a spokeswoman for Well Fargo’s Corporate Trust Services group, said in an email that Wells Fargo “is working collaboratively with the district” to ensure the district’s disclosure requirements are complied with.
Bodley said the district’s new executive director Alanna Brogan would put the district back on track. Brogan was one of 11 applicants for the job. Of these, Bodley said three were interviewed.
Brogan, she said, was the chief nursing and support executive for the Petaluma Health Care District and is a lecturer at Sonoma State University’s nursing department. Previously, she was a manager at the Petaluma Health Care District and Santa Rosa Memorial Hospital.
“Alanna comes with excellent credentials,” Bodley said. “She has both hospital experience and health district experience.”