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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

 

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Rating Action:

Moody's places Acadia Healthcare's ratings on review for upgrade

29 Jan 2021

New York, January 29, 2021 -- Moody's Investors Service (Moody's) today placed the ratings of Acadia Healthcare Company, Inc.'s ("Acadia") ratings on review for upgrade, including its B2 RUR-Up Corporate Family Rating (CFR) and B2-PD RUR-Up Probability of Default Rating. Moody's also placed Acadia's senior secured ratings on review for upgrade at Ba2 RUR-Up and its senior unsecured ratings on review for upgrade at B3 RUR-Up. The rating agency also upgraded Acadia's Speculative Grade Liquidity Rating to SGL-1 from SGL-3. The outlook was also placed on review.

Today's rating action follows the completion of Acadia's sale of its U.K. operations to Waterland Private Equity for approximately GBP1.078 billion in January 2021. Net of transaction costs and the settlement of foreign currency hedging liabilities, Acadia generated proceeds of around $1.35 billion. "This transaction is credit positive because it will facilitate deleveraging and rid the company of a challenged business," commented Moody's Vice President-Senior Credit Officer Jonathan Kanarek. "These benefits more than offset the significant loss of scale and geographic diversity as a result of the divestiture," he continued.

The change in the Speculative Grade Liquidity Rating to SGL-1 reflects the company's successful divestiture of a large, yet challenged U.K. business and Moody's expectation that Acadia will generate consistently positive free cash flow over the next 12-18 months while maintaining good cash balances and significant access to its revolving credit facility.

Moody's review process will focus on the composition of Acadia's new capital structure and any potential changes in financial policy. It will also focus on the Acadia's ability to generate free cash flow, which has historically been limited by aggressive growth initiatives in its U.S. business, and the company's acquisition strategy.

Acadia Healthcare Company, Inc.

Ratings placed on review for upgrade:

Corporate Family Rating to B2 RUR-Up from B2

Probability of Default Rating to B2-PD RUR-Up from B2-PD

Senior secured ratings to Ba2 (LGD2) RUR-Up from Ba2 (LGD2)

Senior unsecured ratings to B3 (LGD5) RUR-Up from B3 (LGD5)

Ratings upgraded:

Speculative Grade Liquidity Rating to SGL-1 from SGL-3

Outlook change:

The outlook, previously stable, has been placed on review.

RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Excluding the review, the B2 CFR is constrained by Acadia's high financial leverage as well as its reliance on government reimbursement from Medicare and Medicaid. There are also risks associated with the rapid pace of growth through acquisitions, opening of new facilities and the addition of new beds in existing facilities. Further, the continuing spread of the coronavirus will temporarily reduce patient volumes at Acadia's behavioral health facilities. The B2 CFR is supported by the company's large scale and good business and geographic diversity within the domestic behavioral health care industry. It is also supported by attractive industry fundamentals, including growing demand for services and increasing willingness of payors, including governments, to pay for behavioral health and addiction treatment services. The B2 rating is also supported by the company's strong operating cash flow and good liquidity.

As an operator of inpatient behavioral health hospitals, Acadia faces high social risk. Any incident, such as a patient fatality or a patient not receiving appropriate care at one of Acadia's facilities, can result in increased regulatory burdens, government investigations, and negative publicity. Acadia also has environmental risk associated with inclement weather and natural disasters. For example, Hurricane Dorian weakened patient volumes in some of the company's North Carolina and Florida facilities in September 2019, while wildfires in California in October 2019 necessitated the evacuation of three of the company's facilities and dampened the patient volumes of others. From a governance perspective, the significant amount of capital that Acadia has allocated to acquisitions and new bed additions has not yet demonstrated adequate returns, given that Acadia's LTM EBITDA as of September 30, 2020 is below where it was in 2016.

Acadia is a provider of behavioral health care services. Acadia provides psychiatric and chemical dependency services to its patients in a variety of settings, including inpatient psychiatric hospitals, residential treatment centers, outpatient clinics and therapeutic school based programs. Acadia operates behavioral health facilities spanning across the US, Puerto Rico, England, Wales, and Scotland. As of September 30, 2020, Acadia generated LTM pro forma revenue of approximately $2.0 billion.

The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1037985. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

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

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, 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 issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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.

Jonathan Kanarek, CFA
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Jessica Gladstone, CFA
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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