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Rating Action:

Moody's changes HCA's outlook to positive; B1 CFR unchanged

Global Credit Research - 16 Dec 2013

New York, December 16, 2013 -- Moody's Investors Service revised the rating outlook for HCA to positive from stable. The company's B1 Corporate Family Rating and B1-PD Probability of Default Rating are unchanged but have been reassigned to the HCA Holdings, Inc. level -- the highest level in the corporate structure with rated debt. HCA, Inc. is a wholly owned subsidiary of HCA Holdings, Inc. (collectively HCA). Moody's also reassigned the company's Speculative Grade Liquidity Rating at the holding company level. Concurrently, Moody's affirmed the ratings on HCA's existing debt instruments.

The positive outlook reflects Moody's expectation that HCA's scale and dominant market strength will allow the company to continue to grow revenue and EBITDA and maintain margins at the higher end of the range of its peers. While the company will likely continue to return capital to shareholders in lieu of debt repayment, Moody's anticipates that HCA will generate sufficient cash flow to fund moderate sized acquisitions with little detrimental impact on credit metrics. Moody's also expects the expansion of insurance coverage under the Affordable Care Act to benefit HCA's margins in 2014 through lower bad debt expense. However, that benefit will be tempered by the company's concentrations in Florida and Texas, two states that have elected not to expand Medicaid programs as envisioned under the ACA.

Following is a summary of Moody's rating actions.

HCA Holdings, Inc.

Ratings assigned:

Corporate Family Rating at B1

Probability of Default Rating at B1-PD

Speculative Grade Liquidity Rating at SGL-2

Ratings affirmed:

Senior unsecured notes at B3 (LGD 6, 95%)

HCA, Inc.

Ratings withdrawn:

Corporate Family Rating at B1

Probability of Default Rating at B1-PD

Speculative Grade Liquidity Rating at SGL-2

Ratings affirmed / LGD assessments revised:

Senior secured ABL revolver at Ba1 (LGD 1, 2%)

Senior secured revolver at Ba3 (LGD 3, 35%) from (LGD 3, 34%)

Senior secured term loans at Ba3 (LGD 3, 35%) from (LGD 3, 34%)

Senior secured notes at Ba3 (LGD 3, 35%) from (LGD 3, 34%)

Senior unsecured notes at B3 (LGD 5, 84%)

Senior secured shelf at (P) Ba3

Senior unsecured shelf at (P) B3

RATINGS RATIONALE

HCA's B1 Corporate Family Rating reflects Moody's expectation that the company will operate with significant leverage. The rating also reflects Moody's consideration of HCA's scale and position as the largest for-profit hospital operator in terms of revenue, which aids its ability to obtain resources needed to adapt to changes in the sector and in the company's ability to weather industry pressures. Finally, the rating incorporates Moody's expectation that the company will limit increases in leverage for shareholder initiatives.

Moody's would have to see the company maintain a more conservative financial profile, consistent with that expected of the Ba3 rating, prior to considering an upgrade of the rating to that level, including limiting increases in leverage for shareholder distributions or share repurchases. Additionally, Moody's would have to see continued earnings growth or repayment of debt such that debt/EBITDA was expected to be maintained closer to 4.5 times.

If the company experiences a deterioration in operating trends, for example, negative trends in same-facility adjusted admissions or same-facility revenue per adjusted admission, Moody's could downgrade the rating. Additionally, Moody's could downgrade the ratings if the company incurs additional debt to fund shareholder distributions or acquisitions so that debt/EBITDA was expected to be sustained above 5.5 times.

For further details refer to Moody's Credit Opinion for HCA Holdings, Inc. on moodys.com.

The principal methodology used in this rating was the Global Healthcare Service Providers published in December 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

HCA Inc. is a wholly owned subsidiary of HCA Holdings, Inc. (collectively HCA). Headquartered in Nashville, Tennessee, HCA is the nation's largest acute care hospital company as measured by revenue. A portion of the equity of HCA is still held by private equity firms Bain Capital and KKR as well as members of management. The company generated revenue in excess of $33 billion, net of the provision for doubtful accounts, in the twelve months ended September 30, 2013.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Dean Diaz
Senior Vice President
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 changes HCA's outlook to positive; B1 CFR unchanged
No Related Data.
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