Tower Health Faces Another Financial Challenge as S&P Downgrades Credit Rating for Second Time in Month

Tower Health’s credit rating has been downgraded by Standard & Poor’s (S&P) for the second time in less than a month, from CC to CCC. The decision came after the announcement of a major bond refinancing by the Berks County nonprofit health system. S&P described the move as a “distressed restructuring” due to Tower’s weak cash reserves.

If the proposed refinancing is completed as planned in August, Tower Health will increase its borrowings by over $150 million to help support its heavy debt load and improve its cash reserves. The refinancing will also allow Tower to delay a significant amount of principal and interest payments, giving the organization more time to improve its operations according to S&P analyst Anne E. Cosgrove. However, bondholders will receive less value than they would have under the original bonds.

Tower Health expressed strong disagreement with S&P’s rating decision on June 13, stating that they had established a clear path to profitability. Last month, S&P downgraded Tower from CCC+ to CCC due to concerns about the health system’s ability to pay $220 million in bonds required in three tranches by early 2029. The refinancing will eliminate these payments and provide bondholders with a lien on Tower’s real estate, providing more security.

Despite the new bonds not being rated, Tower is expected to pursue a new rating within six months of issuance. Tower Health is centered around Reading Hospital in West Reading, with additional hospitals in Phoenixville and Pottstown. The health system also owns St. Christopher’s Hospital for Children in Philadelphia as part of a joint venture with Drexel University.