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Rating Action:

Moody's downgrades Community Health's CFR to B2; secured debt to Ba3; unsecured notes to Caa1; outlook is stable

Global Credit Research - 23 May 2016

New York, May 23, 2016 -- Moody's Investors Service, ("Moody's") today downgraded the Corporate Family Rating of CHS/Community Health Systems, Inc. to B2 from B1. The Probability of Default Rating was also downgraded to B2-PD from B1-PD. Further, Community's senior secured bank debt and senior secured bonds have been downgraded to Ba3 (LGD 2) from Ba2 (LGD 2) and its unsecured notes have been downgraded to Caa1 (LGD 5) from B3 (LGD 5). Community's Speculative Grade Liquidity Rating was affirmed at SGL-2. The rating outlook has been revised to stable from negative.

"The downgrade of Community's Corporate Family Rating to B2 reflects our expectation that financial leverage will remain high with debt to EBITDA above 5.5 times over the near term and that deleveraging to acceptable levels will take longer than anticipated," stated Dean Diaz, Moody's Senior Vice President. "Further reduction in leverage will depend on the company's ability to successfully turn around operations at underperforming hospitals and maximize recently announced asset sales," continued Diaz.

The stable rating outlook reflects Moody's expectation that the company will begin to realize EBITDA growth and improved operating results from recent actions, but that the company's ability to meaningfully reduce leverage is modest. Moody's also expects that Community will refrain from additional debt financed acquisitions and share repurchases until leverage is reduced.

The affirmation of the SGL-2 rating reflects Moody's expectation that Community will maintain good liquidity, characterized by modest and growing free cash flow and ample availability under its revolving credit facility.

Following is a summary of Moody's rating actions.

Ratings downgraded:

Corporate Family Rating to B2 from B1

Probability of Default Rating to B2-PD from B1-PD

Senior secured bank credit facilities to Ba3 (LGD 2) from Ba2 (LGD 2)

Senior secured notes to Ba3 (LGD 2) from Ba2 (LGD 2)

Senior unsecured notes to Caa1 (LGD 5) from B3 (LGD 5)

Ratings affirmed:

Speculative Grade Liquidity Rating at SGL-2

The rating outlook was revised to stable from negative.

RATINGS RATIONALE

Community's B2 Corporate Family Rating reflects Moody's expectation that the company will continue to operate with very high financial leverage over the next 12 to 18 months. While asset sales will allow the company to repay debt, the impact on leverage will be limited given the significant amount of debt outstanding and the foregone EBITDA. Supporting the rating is Moody's acknowledgment of Community's large scale and strong market presence, which remains significant even after the spin-off of 38 facilities and a hospital management business into Quorum Health Corporation and other planned divestitures. Moody's anticipates that the company will continue to see stable to improving margin performance in the near term from a number of operational improvement initiatives.

Moody's could upgrade the ratings if operational initiatives result in volume growth that remains on par with the peer group and good liquidity is maintained. Further, Community will have to reduce and sustain debt to EBITDA at close to 5.0 times for a ratings upgrade.

If the company is not able to sustain debt to EBITDA below 6.0 times, the ratings could be downgraded. The ratings could also be downgraded if Community completes a significant debt financed acquisition or share repurchase. Finally, if liquidity weakens, either because of operational shortfalls or adverse developments related to ongoing investigations, Moody's could downgrade the ratings.

CHS/Community Health Services, Inc., headquartered in Franklin, Tennessee, is an operator of general acute care hospitals in non-urban and mid-sized markets throughout the US. Community recognized approximately $19.5 billion in revenue for the twelve months ended March 31, 2016.

The principal methodology used in these ratings was Business and Consumer Service Industry published in December 2014. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

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 downgrades Community Health's CFR to B2; secured debt to Ba3; unsecured notes to Caa1; outlook is stable
No Related Data.
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