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Global Credit Research - 24 Jun 2010
Approximately $530 million of rated debt affected.
New York, June 24, 2010 -- Moody's Investors Service downgraded the Corporate Family and Probability
of Default Ratings of Symbion, Inc. (Symbion) to B3 from
B2. Moody's also downgraded the ratings on the company's
senior secured credit facilities to B1 (LGD2, 26%) from Ba3
(LGD2, 28%) and its senior unsecured toggle notes to Caa2
(LGD5, 81%). The outlook for the ratings remains negative.
Moody's also affirmed Symbion's Speculative Grade Liquidity
Rating of SGL-3
The downgrade of the Corporate Family Rating reflects our expectation
that Symbion will continue to have difficulty growing EBITDA and reducing
the company's considerable financial leverage given continued pressure
on volumes and pricing. Moody's believes that absent a meaningful
improvement in earnings and cash flow, the company will need to
access the capital markets or restructure in order to address upcoming
cash obligations. Additionally, we believe that the lack
of deleveraging and the scheduled tightening of financial maintenance
covenant levels in Symbion's credit facility could pressure the
company's liquidity profile and make compliance with those covenants
less certain over the near term. However, the rating also
considers the company's strong margins and stable cash flow generation,
which has allowed for the build-up of a considerable cash balance.
Further, the rating also reflects our expectation that as one of
the larger operators of ambulatory surgery centers in a highly fragmented
sector, the company should be well positioned to benefit from the
continued movement of services to the outpatient setting.
The negative ratings outlook anticipates increasing pressure on Symbion's
liquidity given upcoming obligations related to the amortization of the
company's term loan and the required cash settlement of interest
on the company's toggle notes in the first quarter of 2012.
Further, we expect restrictions on the company's ability to access
its revolver due to covenant limitations and a reduction in headroom as
covenant levels become more restrictive. Additionally, the
negative outlook reflects our concerns about further impact on margin
performance and cash flow generation from the slowing of pricing and volume
growth, which in turn, could increase the likelihood that
the company may not be able to meet its financing obligations.
For further details refer to Moody's Credit Opinion for Symbion,
Inc. on moodys.com.
The following is a summary of Moody's rating actions.
$100 million senior secured revolving credit facility, to
B1 (LGD2, 26%) from Ba3 (LGD2, 28%)
$125 million senior secured term loan A due 2013, to B1 (LGD2,
26%) from Ba3 (LGD2, 28%)
$125 million senior secured term loan B due 2014, to B1 (LGD2,
26%) from Ba3 (LGD2, 28%)
Senior unsecured PIK toggle notes due 2015, to Caa2 (LGD5,
81%) from Caa1 (LGD5, 83%)
Corporate Family Rating, to B3 from B2
Probability of Default Rating, to B3 from B2
Speculative Grade Liquidity Rating, SGL-3
Moody's last rating action was on October 28, 2009, when we
affirmed Symbion's ratings, including the B2 Corporate Family
and Probability of Default ratings and kept the ratings outlook negative.
Symbion's ratings were assigned by evaluating factors we believe are relevant
to the credit profile of the issuer, such as i) the business risk
and competitive position of the company versus others within its industry,
ii) the capital structure and financial risk of the company, iii)
the projected performance of the company over the near to intermediate
term, and iv) management's track record of tolerance for risk.
These attributes were compared against other issuers both within and outside
of Symbion's core industry and Symbion's ratings are believed to be comparable
to those other issuers of similar credit risk.
Symbion, headquartered in Nashville, Tennessee, owns
and operates a network of short-stay surgical facilities providing
non-emergency surgical procedures in various specialties,
including orthopedics, pain management, gastroenterology and
ophthalmology. As of March 31, 2010, Symbion owned
and operated 53 ambulatory surgery centers (ASCs) and four surgical hospitals.
The company also managed eight additional surgery centers and one physician
network. For the twelve months ended March 31, 2010,
the company recognized revenues of approximately $348 million.
Corporate Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
Moody's downgrades Symbion's ratings; CFR to B3; outlook remains negative
No Related Data.
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