Tower Health Receives Another Credit Downgrade from S&P Ratings.

Tower Health’s credit rating was downgraded by Standard & Poor’s from CCC+ to CCC on Tuesday. The downgrade was due to Tower’s low financial reserves and concerns about its ability to pay off $64.6 million in bonds due in February. Despite this, S&P acknowledged Tower’s efforts to cut costs, improve bill collection, and focus on its core markets in Berks County and parts of Chester and Montgomery Counties.

Although these efforts have helped reduce Tower’s operating losses, the nonprofit health system is still facing challenges such as elevated labor costs and inflation. Despite Tower’s positive momentum, S&P deemed its financial position as precarious.

The CCC rating signifies Tower as a high-risk investment that needs favorable business conditions to meet its debt obligations. Tower must pay off additional bonds in 2027 and 2029, along with its upcoming February payment. Tower’s long-term debt of $1.5 billion and restricted reserves of $159.8 million were considered extremely low by S&P.

To address its financial challenges, Tower may negotiate debt relief with bondholders to buy more time for a financial turnaround. Tower had enlisted the help of investment bank Houlihan Lokey to negotiate refinancing options in early 2021. Despite its financial difficulties, Tower Health remains anchored by Reading Hospital and still operates Phoenixville and Pottstown Hospitals, along with a stake in St. Christopher’s Hospital for Children in Philadelphia.