While Fitch believes that liquidity is sufficient for the sector over the next couple years, it should be noted that good liquidity is a requirement for the sector in order to provide financial flexibility to pursue strategic acquisitions or licensing arrangements, or to manage external stresses such as legal challenges and settlements associated with product liability or other material events.
'There are inherent event risks associated with the health care industry that require increased financial flexibility to ensure a stable credit profile,' said Michael Weaver, Managing Director, Fitch Ratings.
The for-profit hospital industry does represent a subsector of healthcare with greater liquidity concerns due to a challenging operating environment. This stems from rising levels of bad debt expense and uncompensated care. The sector has also accumulated much higher levels of debt, primarily from several significant leveraged transactions over the past year.
This report is part of the larger global liquidity review initiated by Fitch in May 2007 of its rated issuers across corporate finance as a number of liquidity-based sensitivities in the market continue to influence both issuer and investor decisions. The review's goal is to gain a better perspective on the magnitude of maturities that would be coming due over the next 24 months per each North American corporate sector, and what organic and contingent sources were available to meet these obligations during this period of the credit cycle.
