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Global Credit Research - 08 Mar 2011
Approximately $716 million of rated debt affected
New York, March 08, 2011 -- Moody's Investors Service upgraded the rating on the 9.875%
senior subordinated notes of Radiation Therapy Services ("RTS")
to B3 from Caa1 following the $66.3 million add-on
to the original $310 million issue amount. The $66.3
million proceeds along with $16 million equity contribution were
used to acquire Medical Developers LLC ("MDLLC") -- a
developer and operator of cancer treatment facilities in Latin America.
In addition, the company's senior secured term loan and revolving
credit facility were upgraded to Ba2 from Ba3 and the B2 corporate family
and probability of default ratings were affirmed. The ratings outlook
was changed to negative from stable.
The following rating actions were taken:
Corporate family rating, affirmed at B2;
Probability of default rating, affirmed at B2;
$265 million first lien term loan, due 2014, upgraded
to Ba2 (LGD2, 18%) from Ba3 (LGD2, 23%);
$75 million first lien revolving credit facility, due 2013,
upgraded to Ba2 (LGD2, 18%) from Ba3 (LGD2, 23%);
$376.3 million senior subordinated notes, due 2017,
upgraded to B3 (LGD5, 75%) from Caa1 (LGD5, 80%).
The upgrade of the senior secured facilities to Ba2 from Ba3 and subordinated
notes to B3 from Caa1 reflects the relative ranking of the debt in the
capital structure as the percentage of senior secured debt has decreased
as compared to the senior subordinated debt. The upgrades are consistent
with Moody's loss given default methodology.
The B2 corporate family rating continues to reflect RTS' considerable
debt leverage and the rating also considers the company's limited
absolute scale as well as concentration of revenues by payor (Medicare)
and geography (Florida). In addition, the rating reflects
the company's aggressive acquisition strategy.
The rating favorably reflects the company's competitive position as the
largest pure-play national provider of radiation therapy to cancer
patients and the longer-term strong underlying industry demand
fundamentals. The rating also considers the near-term visibility
in the reimbursement environment.
The change in the outlook to negative reflects the company's operating
performance including lower margins as ancillary practices, which
are less capital intensive but have inherently lower margins, are
acquired and continued softness in volumes in the radiation oncology industry
as reflected by declines in same center revenues and EBITDA. Further,
the negative outlook considers RTS' adequate liquidity profile.
The ratings could be downgraded if the company's free cash flow
turns negative on a sustained basis or debt to EBITDA increases to above
6.0 times on a sustained basis. Further, if the company's
liquidity profile were to weaken further there could be negative ratings
pressure. Also, if there are declines in Medicare reimbursement
for 2012 or beyond we could downgrade the ratings.
The outlook could be changed back to stable if the company is able to
improve its EBITDA margins, reduce adjusted debt to EBITDA to 5
times (without pro forma acquisition EBITDA adjustments), or improve
its liquidity profile. In addition, for the outlook to be
changed back to stable, same center revenue and EBITDA would have
to show improvement. The ratings could be upgraded if the company's
debt to EBITDA would decline on a sustained basis below 4 times,
free cash flow to debt increase on a sustained basis above 5%,
and EBITDA less capital expenditures to interest expense increase on a
sustained basis above 2.5 times. Ratings upgrade would also
have to be supported by stable reimbursement environment, steady
or improving volumes, and good liquidity position.
Radiation Therapy Services owns and operates radiation treatment facilities
in the US and Latin America. The company's revenues for 2010 were
approximately $544 million.
The principal methodology used in this rating was Loss Given Default for
Speculative-Grade Non-Financial Companies in the U.S.,
Canada and EMEA published in June 2009.
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
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
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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.
Corporate Finance Group
Moody's Investors Service
Andris G. Kalnins
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's upgrades Radiation Therapy Services' $376.3 million sr. sub notes to B3 and credit facilities to Ba2; outlook changed to negative
250 Greenwich Street
New York, NY 10007
No Related Data.
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