New York, November 14, 2012 -- Moody's Investors Service today affirmed Alliance Healthcare Services,
Inc.'s ("Alliance") B1 Corporate Family and Probability
of Default Ratings. At the same time, the senior secured
credit facilities and senior notes are also affirmed at Ba3 and B3,
respectively. In addition, Moody's raised the Speculative
Grade Liquidity Rating to SGL-2 from SGL-3. The outlook
is negative.
Following is a summary of Moody's rating actions and LGD revised estimates:
Alliance Healthcare Services, Inc.
Ratings upgraded:
Speculative Grade Liquidity Ratings at SGL-2 from SGL-3
Rating affirmed:
Corporate Family Rating at B1;
Probability of Default Rating at B1;
Senior secured term loan B at Ba3 (LGD 3, 30%) from (LGD
3, 32%);
Revolving credit facility at Ba3 (LGD 3, 30%) from (LGD 3,
32%);
Senior notes at B3 (LGD 5, 85%);
Outlook negative
RATINGS RATIONALE
Alliance's B1 Corporate Family Rating reflects the company's high financial
leverage, weak interest coverage and challenging top line performance.
High unemployment and weak client volumes have adversely impacted both
revenues and operating margins. For the first nine months of 2012,
Alliance continues to be impacted by lower volumes and pricing pressures,
primarily for their PET/CT business. Over the next few quarters,
Moody's expects continued top-line softness due to the aforementioned
macroeconomic factors as well as the company's continuing actions
to rationalize non-profitable business.
The ratings benefit from Alliance's unique business model of partnering
with hospitals, which shields the company from the direct effect
of changes in third party reimbursement. This model also allows
the company to expand based on demand for services rather than bearing
the risk of non-hospital, physician-based de novo
development.
The negative outlook reflects the challenges over the next few quarters
as Alliance continues to experience a weak pricing environment due to
industry overcapacity and lower volumes associated with declining physician
visits.
Moody's does not believe that an upgrade is likely in the near-term.
However, the outlook could be changed to stable if the company can
demonstrate solid revenue and volume growth, while also simultaneously
deleveraging. Should Alliance generate positive organic revenue
growth, deleverage below 4 times and sustain adjusted free cash
flow to debt above 8%, the ratings could be upgraded.
The ratings could be downgraded if continued pressure on the imaging business
cannot be offset through expansion and cost containment initiatives.
We would consider a downgrade if the company takes on a debt-financed
acquisitions, if liquidity deteriorates, or if debt to EBITDA
rises above 5 times.
The principal methodology used in rating Alliance was the Global Business
& Consumer Service Industry Methodology, published in October
2010. Other methodologies used include Loss Given Default for Speculative
Grade Issuers in the US, Canada, and EMEA, published
June 2009. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
Alliance HealthCare is a national provider of outpatient diagnostic imaging
and radiation oncology services. The company maintained 499 diagnostic
imaging and radiation oncology systems, including 271 MRI systems
and 120 PET and PET/CT systems at September 30, 2012. The
company operates 130 fixed-site imaging centers, which constitutes
systems installed in hospitals or other medical buildings on or near hospital
campuses. The company also operates 30 radiation oncology centers
and stereotactic radio surgery facilities. Revenue for the twelve
months ended September 30, 2012, was approximately $478
million.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Please see Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's provides a date that it believes is
the most reliable and accurate based on the information that is available
to it. Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has
issued the rating.
Ron Neysmith
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's affirms Alliance Healthcare's CFR; outlook negative