A leading credit rating company has downgraded its outlook for the skilled care sector, citing legal woes tied to the pandemic.
A report issued by DBRS Morningstar reviewed the ratings of commercial mortgage-backed securities that are using skilled nursing facilities as collateral. The analysis highlighted three transactions that primarily are backed by skilled nursing facilities. The authors noted that they made the decision to undertake the review in light of Centers for Medicare & Medicaid Services estimates that there have been at least 45,900 skilled nursing facility resident deaths as of Aug. 1 and a New York Times analysis suggesting that more than 40% of all coronavirus deaths nationwide involve skilled care residents and staff.
The company said it confirmed through media reports and service disclosures that fatalities have occurred at the facilities backing loans for some of these transactions. And although the company is unaware of any lawsuits targeting those facilities, many other properties are facing wrongful death lawsuits.
“The staggering coronavirus-related toll adds an additional layer of risk for healthcare providers, and DBRS Morningstar sees elevated risk in the future,” the firm noted. “In addition to the potential effect on near-term cash flow, valuations of these assets may be depressed until the outcome of cases is settled. This may affect the ability of borrowers to refinance their loans.”
This article appeared in the McKnight’s Business Daily, a joint effort of McKnight’s Senior Living and McKnight’s Long-Term Care News.
