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Related Issuers
Rating Action:

Moody's places LifePoint Health's ratings on review for downgrade

22 Jun 2021

New York, June 22, 2021 -- Moody's Investors Service (Moody's) placed the ratings of LifePoint Health, Inc. ("LifePoint") on review for downgrade following the company's proposed acquisition of Kindred Healthcare LLC ("Kindred") . The ratings placed under review for downgrade include the B2 Corporate Family Rating (CFR), B2-PD Probability of Default Rating, B1 senior secured rating, and Caa1 senior unsecured rating. The outlook was revised to rating under review from stable.

On June 21, 2021, LifePoint announced plans to acquire Kindred for an undisclosed sum. No further details are available at this time in regards to the updated capital structure. Management expects the transaction to close by the end of 2021.

On Review for Downgrade:

..Issuer: LifePoint Health, Inc.

.... Corporate Family Rating, Placed on Review for Downgrade, currently B2

.... Probability of Default Rating, Placed on Review for Downgrade, currently B2-PD

....Senior Secured Bank Credit Facility, Placed on Review for Downgrade, currently B1 (LGD3)

....Senior Secured Regular Bond/Debenture, Placed on Review for Downgrade, currently B1 (LGD3)

....Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently Caa1 (LGD5)

Outlook Actions:

..Issuer: LifePoint Health, Inc.

....Outlook, Changed To Rating Under Review From Stable

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

Excluding the ongoing review, LifePoint's B2 CFR reflects the company's high financial leverage, with debt to EBITDA of approximately 5.1 times as of March 31, 2021. Moody's expects improvement in LifePoint's leverage and cash flow to be driven by a decline in capital expenditures as significant investments in replacement facilities are now complete. LifePoint faces a moderate level of implementation risk, however, with respect to the outsourcing of revenue cycle management functions at some of its hospitals over the next few quarters. Further, Moody's has very low growth expectations for non-urban hospitals given multiple industry headwinds. LifePoint's rating is supported by the company's large scale and good geographic diversity. LifePoint has maintained good liquidity that has been helped in part by substantial government aid to hospitals and good access to the capital markets.

The rating review will focus on the combined firm's larger scale, diversified service offering and opportunities for synergies. The review will also focus on the growth and financial profile following the transaction, including capital structure, financial leverage, financial policies and liquidity.

ESG considerations are material to the rating of LifePoint. With respect to governance, LifePoint's ownership by private equity firm Apollo Management will result in the deployment of aggressive financial policies. While LifePoint may pursue an IPO longer-term given its large scale, Apollo may take dividends along the way, particularly if the company achieves its cash flow and deleveraging goals.

As a for-profit hospital operator, LifePoint also faces high social risk. The affordability of hospitals and the practice of balance billing has garnered substantial social and political attention. Hospitals are now required to publicly provide the list price of all of their services, although compliance and practice is inconsistent across the industry. Additionally, hospitals rely on Medicare and Medicaid for a substantial portion of reimbursement. Any changes to reimbursement to Medicare or Medicaid directly impacts hospital revenue and profitability. Further, as LifePoint is focused on non-urban communities, slow population growth tempers the company's capacity to grow admissions.

LifePoint Health, Inc., headquartered in Brentwood, Tennessee, is an operator of general acute care hospitals, community hospitals, regional health systems, physician practices, outpatient centers and post-acute care facilities in non-urban markets. The company operates 88 hospitals in 29 states under the private ownership of funds affiliated with Apollo Global Management, LLC. LifePoint merged with RegionalCare in November 2018. Revenues are approximately $8.2 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 http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.

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

Ola Hannoun-Costa
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.
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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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