The speculative downgrade on New Jersey Health Care Facilities Finance Authority's bonds, issued for Rahway Hospital, is based on the hospital's: Lack of timely response to effectively correct systemic problems, the cumulative effects of which are threatening its business fundamentals; Accelerating operating losses, which led to violation of bond covenants with debt service coverage of less than 1.25 times (x); and Gradual decline in liquidity to $13.9 million in 1999, from $20.5 million in 1996. Rahway hospital is a 223-staffed bed acute provider located in Union County, N.J., a competitive market place. Rahway was profitable prior to 1994. Since then, the hospital has faced increasing penetration of managed care, decreased reimbursements, especially as a result of the Balanced Budget Act,
