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Rating Action:

Moody's lowers the rating on LifePoint's senior debt to Ba2; Ba2 CFR affirmed; outlook is stable

Global Credit Research - 01 May 2014

NOTE: On May 05, 2014, the press release was corrected as follows: In the debt list, the Probability of Default Rating was changed from Ba2 to Ba2-PD. Revised released follows.

New York, May 01, 2014 -- Moody's Investors Service downgraded the ratings of LifePoint Hospitals, Inc.'s existing senior secured credit facilities and senior unsecured notes, both to Ba2 from Ba1. Moody's also affirmed LifePoint's Ba2 Corporate Family Rating and Ba2-PD Probability of Default Rating. The rating outlook is stable. The actions follow LifePoint's proposed $400 million add-on to the company's 5.5% senior unsecured notes due 2021. Moody's understands that the proceeds of the new notes will be used, along with cash on hand, for general corporate purposes, including the upcoming maturity of $575 million in convertible subordinated notes.

The downgrade of the ratings on LifePoint's credit facilities and unsecured notes reflects the elimination of a layer of loss absorption below this more senior debt following the near term maturity of the company's senior subordinated notes and the proposed increase in the amount of senior unsecured debt outstanding resulting from the current offering.

LifePoint's senior unsecured notes remain rated at the same level as the company's senior secured debt. Given that the credit facilities are secured solely by a pledge of stock and not by any hard assets, Moody's views this as a weak collateral package and assigns a 100% deficiency claim. This results in the credit facilities being effectively unsecured with respect to Moody's loss given default methodology, and hence the credit facilities are rated at the same level as the unsecured notes.

Ratings downgraded:

Senior secured credit facilities to Ba2 (LGD 4, 51%) from Ba1 (LGD 3, 39%)

Senior unsecured notes to Ba2 (LGD 4, 51%) from Ba1 (LGD 3, 39%)

Ratings affirmed:

Corporate Family Rating at Ba2

Probability of Default Rating at Ba2-PD

Speculative Grade Liquidity Rating at SGL-2

RATINGS RATIONALE

LifePoint's Ba2 Corporate Family Rating reflects Moody's expectation that the company's operating performance will result in strong interest coverage and cash flow coverage of debt. Leverage will remain high in the near term but is expected to fall below 4.0 times. Moody's also expects the company to continue with its active pursuit of acquisitions and share repurchases. The rating also incorporates Moody's expectation of a difficult operating environment in the near term, characterized by reimbursement pressures and weak volume trends, but improving over the next 12-18 months as provisions of the Affordable Care Act are further implemented.

Moody's does not expect an upgrade in the near term given the elevated leverage. However, Moody's could upgrade the rating if the company grows earnings through acquisitions that do not significantly disrupt operations or require a material use of incremental debt, such that debt to EBITDA is sustained at or below 3.0 times.

Moody's could downgrade the rating if it believes LifePoint's financial policy is becoming more aggressive and it pursues debt financed acquisitions or share repurchases. Ratings could also be downgraded if the company experiences operating challenges, or if for any other reason Moody's expects debt to EBITDA to be sustained above 4.0 times.

For further details, refer to Moody's Credit Opinion for LifePoint Hospitals, 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.

Headquartered in Brentwood, Tennessee, LifePoint is a leading operator of general acute care hospitals with operations predominantly in non-urban communities. The company generated revenue of approximately $3.7 billion net of the provision for doubtful accounts in the twelve months ended March 31, 2014.

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 lowers the rating on LifePoint's senior debt to Ba2; Ba2 CFR affirmed; outlook is stable
No Related Data.
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