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Rating Action:

Moody's rates HCA's HoldCo note offering Caa1 and changes HCA's outlook to positive; CFR confirmed at B2

09 Nov 2010

Approximately $30 billion of rated debt affected

New York, November 09, 2010 -- Moody's Investors Service assigned a Caa1 (LGD6, 96%) rating to HCA Inc.'s (HCA) proposed offering of $1,525 million of senior unsecured notes due 2021 to be issued at a parent holding company (HoldCo). We understand the proceeds will be used to help fund a proposed $2.0 billion distribution to shareholders. Concurrently, we confirmed the existing ratings of HCA, including the B2 Corporate Family and Probability of Default Ratings. These actions conclude the review of the ratings initiated on May 7, 2010. The ratings outlook has been revised to positive.

Moody's rating actions are summarized below.

Ratings assigned:

$1,525 million senior unsecured HoldCo notes due 2021, Caa1 (LGD6, 96%)

Ratings confirmed (LGD assessment revised):

ABL Revolver due 2012, Ba2 (LGD2, 12%)

Revolving Credit Facility due 2012, Ba3 (LGD3, 32%)

Term Loan A due 2012, Ba3 (LGD3, 32%)

Term Loan B, Ba3 (LGD3, 32%)

Euro Term loan due 2013, Ba3 (LGD2, 23%)

$1,500 million first lien secured notes due 2019, Ba3 (LGD3, 32%)

$1,250 million first lien secured notes due 2020, Ba3 (LGD3, 32%)

$1,400 million first lien secured notes due 2020, Ba3 (LGD3, 32%)

$1,000 million Second Lien Notes due 2014, to B2 (LGD4, 56%) from B2 (LGD4, 57%)

$3,200 million Second Lien Notes due 2016, to B2 (LGD4, 56%) from B2 (LGD4, 57%)

$310 million Second Lien Notes due 2017, to B2 (LGD4, 56%) from B2 (LGD4, 57%)

$1,500 million Second Lien PIK Notes due 2016, to B2 (LGD4, 56%) from B2 (LGD4, 57%)

Senior unsecured notes (various), to Caa1 (LGD5, 88%) from Caa1 (LGD6, 90%)

Corporate Family Rating, B2

Probability of Default Rating, B2

Rating affirmed:

Speculative Grade Liquidity Rating, SGL-2

RATINGS RATIONALE

"Although the company is adding incremental debt in this transaction, the positive rating outlook reflects that HCA has been able to offset industry pressures, such as increasing bad debt expense and weak volumes, and realize solid earnings growth," stated Dean Diaz, a Moody's Senior Credit Officer. We anticipate that HCA's significant scale and considerable market presence will continue to help diversify risks and that further focus on cost containment should improve performance and provide a strong basis for the company to benefit from a broader economic recovery. The outlook also reflects our expectation that HCA should maintain a good liquidity profile pro forma for the dividend, with solid cash flow generation and sufficient availability under the revolving credit facilities.

HCA's B2 Corporate Family Rating anticipates that the company will continue to operate with significant leverage. Pro forma for the proposed debt financed distribution we estimate that adjusted leverage would have been 5.2 times at September 30, 2010. Furthermore, the company has large maturities in 2012 and 2013 that will likely need to be refinanced in the capital markets. However, the rating acknowledges the company's progress in systematically extending its maturity profile. Finally, the rating reflects HCA's solid EBITDA growth, which has benefited the credit metrics and demonstrated the company's ability to weather industry pressures.

If operating trends are positive and the company is able to grow earnings or repay debt such that free cash flow to adjusted debt reaches a sustainable level of at least 5%, excluding unusual dividends, and adjusted leverage approaches 5.0 times, Moody's could upgrade the ratings.

If the company experiences a deterioration of operating trends, including trends in same-facility adjusted admissions and same-facility revenue per adjusted admission, Moody's could consider changing the outlook back to stable. Additionally, Moody's would consider negative pressure on the ratings if the company were to incur additional debt to fund shareholder distributions or acquisitions so that adjusted leverage was expected to be sustained at or above current levels.

For further details, refer to Moody's Credit Opinion for HCA, Inc. on Moodys.com.

The principal methodologies used in this rating were Global For-Profit Hospital Industry published in September 2008, and Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009.

Headquartered in Nashville, Tennessee, HCA is the nation's largest acute care hospital company with 162 hospitals and 104 freestanding surgery centers (including eight hospitals and eight freestanding surgery centers that are accounted for using the equity method) as of September 30, 2010. For the twelve months ended September 30, 2010, the company recognized revenue in excess of $30 billion.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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New York
Dean Diaz
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Lenny J. Ajzenman
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.

Moody's rates HCA's HoldCo note offering Caa1 and changes HCA's outlook to positive; CFR confirmed at B2
No Related Data.
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