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S&P keeps Prospect Medical on watch
Standard & Poor's said its B- counterparty credit rating on Prospect Medical Holdings Inc. remains on CreditWatch with negative implications.
On Jan. 17, the agency lowered the rating to B- from B+ and placed it on CreditWatch in connection with adverse business development at the company, which S&P expected to result in diminished pro forma cash flow and earnings for fiscal 2007 and the 12-month period ended Dec. 31.
Prospect Medical has further delayed the filing of its 10-K for fiscal 2007 in connection with a review and potential restatement of financial results for Alta Healthcare System, which it acquired in August. In addition, the company has not met the required deadline for submission of financial statements to its lenders, which now constitutes a technical default on its loans.
The agency said it continues to view these events as a material adverse development with possibly meaningful downside consequences for the company's credit profile, particularly since Prospect Medical will require some type of forbearance from its lenders to avoid major liquidity problems.
This negative development is mitigated by the company's current capacity to generate adequate cash flow from operations to service its debt obligations and conduct operations in the near term, S&P added.
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