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S&P lowers Community Health's corporate credit rating; outlook negative

S&P Global Ratings downgraded its corporate credit rating on Community Health Systems Inc. to CCC+ from B-, and said the outlook is negative.

The downgrade reflects weaker-than-expected free cash flow guidance for 2018 and the company's high debt burden. This could make it difficult to refinance the company's upcoming 2019 debt maturities, the rating agency said.

The lower-than-expected cash flow was partly due to higher-than-expected labor costs and recent underperformance of hospitals being divested, S&P said.

The Tennessee-based acute care hospital operator is currently in the process of a "portfolio rationalization," or major downsizing. The hospitals that Community Health has been divesting were mostly underperforming, with low margins and cash flow deficits, the agency said.

The negative outlook reflects the company's "high leverage, history of operating underperformance and uncertainty surrounding the company's ability to succeed in its turnaround plan," the rating agency said.

The negative outlook also reflects higher refinancing risk ahead of the "sizable 2019 debt maturities" as the cash flow is expected to "remain under pressure over the next year," the agency added.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.