Standard & Poor’s downgraded radiology provider Akumin’s credit rating to “D” on Tuesday following news of the company filing for Chapter 11 bankruptcy protection.
The designation is the lowest mark on S&P’s scale, typically used after a company files such a petition, or to denote a default on a financial commitment.
“This follows a lengthy period of operating challenges including stagnant revenue for several years, coupled with a very high interest burden (especially following the end of the payment-in-kind period for the unrated subordinated debt),” analysts David P. Peknay and Viktoria Kovalenko wrote Oct. 24. “We expect to reassess our ratings on the company and its new capital structure when it emerges from bankruptcy.”
Akumin took out a loan with investment firm Stonepeak in 2021 to acquire Alliance Healthcare Services. This debt had continued to accrue interest over the past two years, but on Sept. 1, the agreement switched to “cash pay,” initiating interest payments and placing further financial pressure on Akumin. Filings with the Securities and Exchange Commission show Akumin has struggled to make the interest payments since then, asking for multiple extensions ahead of the Oct. 22 bankruptcy filing.
On top of this, Akumin continues to grapple with the effects of a recent ransomware attack that forced it to halt clinical and diagnostic operations. In a recent SEC filing, the company said it carries cyber/privacy insurance to protect it against certain losses related to such incidents. However, Akumin already has incurred expenses that are not covered by its policy.
“Based on the investigation to date, it appears likely that the attacker accessed files containing personal data, including Protected Health Information,” Akumin said in the filing. “The ongoing investigation is expected to lead to further information regarding the impact of the ransomware incident on the company’s operations, the cost of remediation and other potential liabilities.”
A separate SEC filing also details the loans on which Akumin is defaulting under the bankruptcy process. They include a $55 million revolving credit line with PNC Bank, $475 million in aggregate principal from a loan with UMB Bank, $375 million more with UMB, and $340 million in principal with lender Stonepeak.
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.