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I AGREE
19 Apr 2011
Approximately $2.2 billion of debt rated
New York, April 19, 2011 -- Moody's Investors Service assigned a Ba3 (LGD 2, 23%)
rating to IASIS Healthcare LLC's proposed credit facilities,
consisting of a $300 million revolver and a $935 million
term loan. Moody's also assigned a Caa1 (LGD 5, 78%)
rating to the company's proposed offering of up to $935 million
of senior unsecured notes. IASIS Healthcare LLC is a wholly owned
subsidiary of IASIS Healthcare Corporation (collectively IASIS).
Moody's also affirmed the existing ratings of IASIS, including
the B2 Corporate Family and Probability of Default Ratings. The
outlook for the ratings is stable. Concurrently, Moody's
assigned a Speculative Grade Liquidity Rating of SGL-2.
Moody's understands that the proceeds of the proposed financing
will be used to fund the previously announced proposed purchase of a 78.2%
interest in St. Joseph Medical Center in Houston, TX and
repay the outstanding debt of IASIS, including the balance of the
PIK loan at the parent holding company. Therefore, Moody's
will withdraw the ratings on the company's existing debt upon the
close of the transaction. A portion of the proceeds is also expected
to be used to fund a distribution to the parent holding company that could
be used for future acquisitions or potential distributions to shareholders.
Ratings are subject to the closing of the refinancing as proposed and
Moody's review of final documentation.
Following is a summary of Moody's ratings actions.
Ratings assigned:
$300 million senior secured revolving credit facility expiring
2016, Ba3 (LGD 2, 23%)
$935 million senior secured term loan due 2018, Ba3 (LGD
2, 23%)
$935 million senior unsecured notes due 2019, Caa1 (LGD 5,
78%)
Speculative Grade Liquidity Rating, SGL-2
Ratings affirmed:
Corporate Family Rating, B2
Probability of Default Rating, B2
Ratings affirmed and to be withdrawn at the close of the transaction:
Senior secured letter of credit facility due 2014, Ba2 (LGD 2,
18%)
Senior secured revolving credit facility expiring 2013, Ba2 (LGD
2, 18%)
Senior secured term loan due 2014, Ba2 (LGD 2, 18%)
Senior subordinated notes due 2014, B3 (LGD 5, 70%)
PIK loan at Holdco due 2014, Caa1 (LGD 6, 91%)
IASIS' B2 Corporate Family Rating reflects the company's considerable
financial leverage, which will increase as a result of the proposed
transaction and significant concentration in a few highly competitive
markets. Moody's also expects that free cash flow coverage
of debt metrics will deteriorate as a result of the increased cash interest
burden and higher cash tax payment obligations. However,
while Moody's believes the company may adopt a more aggressive acquisition
strategy, Moody's also anticipates that management will remain
disciplined in any further increase in leverage.
The Speculative Grade Liquidly Rating of SGL-2 reflects Moody's
expectation the company will maintain good liquidity, characterized
by stable free cash flow generation, despite the increase cash use
related to interest and taxes, and ample available cash and revolver
balances.
Given the increase in leverage and the expectation that cash flow metrics
will deteriorate from the company's increased cash burden,
Moody's does not anticipate an upgrade of the ratings in the near
term. However, Moody's could consider upgrading the rating
if adjusted leverage improved to and was expected to be sustained below
5.0 times through either debt repayment or growth in EBITDA.
Moody's could downgrade the rating if the company were to increase leverage
from the pro forma levels for additional debt financed acquisitions or
shareholder initiatives. Moody's could also downgrade the
ratings if cash flow coverage of debt was to decline beyond our expectations
and result in sustained negative free cash flow. This could result
from things such as weak volumes and increased uncompensated care costs,
or market specific issues such as changes to the Medicaid program in Arizona
that materially impacts the company's Health Choice operations.
For further details, refer to Moody's Credit Opinion for IASIS Healthcare
LLC on Moodys.com.
The principal methodology used in rating IASIS Healthcare Corporation
was the Global For-Profit Hospital Industry Methodology,
published September 2008. Other methodologies used include Loss
Given Default for Speculative Grade Issuers in the US, Canada,
and EMEA, published June 2009 (and/or the Government-Related
Issuers methodology, published July 2010.
IASIS Healthcare LLC, a wholly owned subsidiary of IASIS Healthcare
Corporation, is headquartered in Franklin, Tennessee.
IASIS is an owner operator of acute care hospitals in high growth urban
and suburban markets. As of December 31, 2010, IASIS
operated 17 acute care hospitals and one behavioral health hospital located
in seven states. The company also operates Health Choice Arizona,
Inc. (Health Choice), a Medicaid and Medicare managed health
plan in Phoenix.
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, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Analytics 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
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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.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
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
Peter H. Abdill, CFA
MD - Corporate Finance
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.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's rates IASIS' credit facility Ba3; sr. unsecured notes Caa1; B2 CFR affirmed; outlook stable
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
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