A leading credit rating company is raising an alarm about the reliability of the skilled nursing industry, as the sector is likely to face mounting legal woes in the wake of the COVID-19 pandemic.

A newly-issued DBRS Morningstar  report says it is reviewing the ratings of commercial mortgage-backed securities that are using skilled nursing facilities as collateral in light of the legal liabilities the sector is facing as a result of the COVID-19 pandemic.

The report highlighted three transactions that are primarily backed by skilled nursing facilities, as well as a fourth transaction, set to mature in November 2021, which it is also reviewing, but which poses less of a concern since it has been significantly paid down from issuance. The company said it confirmed through media reports and service disclosures that deaths 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.