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Rating Action:

Moody's upgrades HCA's CFR to Ba2; sr. secured debt to Ba1; unsecured notes to B1; outlook is stable

Global Credit Research - 21 Sep 2015

New York, September 21, 2015 -- Moody's Investors Service upgraded the ratings of HCA Holdings, Inc., including the Corporate Family Rating to Ba2 from Ba3 and the Probability of Default Rating to Ba2-PD from Ba3-PD. Concurrently, Moody's upgraded the ratings on the existing debt instruments at HCA Holdings, Inc. and its wholly owned subsidiary HCA, Inc. (collectively "HCA"). HCA's Speculative Grade Liquidity Rating at SGL-2 was also affirmed. The rating outlook is stable.

"We expect that HCA's strong presence in the markets it serves will result in sustainable profitability and contribute to stable cash flow and solid credit metrics," said Dean Diaz, a Moody's Senior Vice President. "While benefits from lower bad debt expense resulting from the expansion of insurance coverage under the Affordable Care Act will slow, HCA's geographic and service line diversification position the company well to adjust to the dynamic healthcare environment," continued Diaz.

The upgrade of the Corporate Family Rating reflects Moody's expectation that debt to EBITDA will modestly improve over the next 12 to 18 months as the company continues to grow revenue and EBITDA. The upgrade also reflects a greater level of comfort that HCA will maintain a more conservative financial policy following the reduction of private equity ownership, the addition of independent Directors to the company's Board, and the company's public disclosure of leverage and liquidity targets. Moody's does not expect a significant improvement in credit metrics in the near term given that the company is presently within its stated leverage target range. Finally, the rating also reflects the risks associated with HCA's considerable debt load, its reliance on government programs as a source of revenue, and the likelihood of continued acquisition and share repurchase activity.

Following is a summary of Moody's rating actions:

Ratings upgraded:

HCA Holdings, Inc.:

Corporate Family Rating to Ba2 from Ba3

Probability of Default Rating to Ba2-PD from Ba3-PD

Senior unsecured notes to B1 (LGD 6) from B2 (LGD 6)

HCA, Inc.:

Senior secured ABL revolver to Baa2 (LGD 1) from Baa3 (LGD 1)

Senior secured revolver to Ba1 (LGD 3) from Ba2 (LGD 3)

Senior secured term loans to Ba1 (LGD 3) from Ba2 (LGD 3)

Senior secured notes to Ba1 (LGD 3) from Ba2 (LGD 3)

Senior unsecured notes to B1 (LGD 5) from B2 (LGD 5)

HCA, Inc. (Oldco)

Senior unsecured notes to B1 (LGD 5) from B2 (LGD5)

Ratings affirmed:

HCA Holdings, Inc.:

Speculative Grade Liquidity Rating at SGL-2

The rating outlook is stable.

RATINGS RATIONALE

The Ba2 Corporate Family Rating reflects HCA's significant scale, its geographic diversification with strong presence in key markets, relatively stable cash flows and Moody's expectation of continued organic growth. The rating is also supported by Moody's belief that HCA will remain disciplined with respect to debt financed shareholder initiatives given the company's publicly disclosed leverage and liquidity targets and the continued decline in the ownership and influence of its private equity sponsors. However, Moody's expects that the company will continue to return capital to shareholders through share repurchases in lieu of debt repayment. Further, the ratings also reflect the significant amount of outstanding debt and ongoing changes to reimbursement levels that will challenge revenue growth and margin expansion.

The stable rating outlook reflects Moody's view that HCA's operating performance will continue to modestly improve over the next 12 to 18 months due to the company's investment in growth initiatives and continued benefit from the expansion of insurance coverage. The outlook also incorporates Moody's expectation that HCA will maintain a conservative financial policy over the rating horizon by balancing creditor and shareholder priorities along with continued investment in growth capital.

Moody's could upgrade the ratings if HCA maintains a conservative financial policy with respect to large debt funded acquisitions, shareholder distributions or share repurchases, improves geographic diversification, and is expected to sustain debt to EBITDA approaching 3.5 times.

Moody's could downgrade the ratings if financial metrics weaken due to deteriorating operating performance or material debt financed shareholder initiatives or acquisitions. More specifically, the ratings could be downgraded if debt to EBITDA is expected to be sustained above 4.5 times.

The principal methodology used in these ratings was Global Healthcare Service Providers published in December 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

HCA Inc. is a wholly owned subsidiary of HCA Holdings, Inc. (collectively HCA). Headquartered in Nashville, Tennessee, HCA is the largest acute care hospital operator in the US, as measured by revenue. The company generated revenue in excess of $38 billion, net of the provision for doubtful accounts, in the twelve months ended June 30, 2015.

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 upgrades HCA's CFR to Ba2; sr. secured debt to Ba1; unsecured notes to B1; outlook is stable
No Related Data.
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