Approximately $550 million of rated debt affected
New York, February 10, 2011 -- Moody's Investors Service upgraded the Corporate Family and Probability
of Default ratings of Team Finance LLC (Team Finance), a subsidiary
of Team Health Holdings, Inc. (collectively Team Health),
to Ba3. Moody's also upgraded the ratings of the company's senior
secured credit facility to Ba3 (LGD3, 47%). The rating
outlook was changed to stable from positive. Concurrently,
Moody's affirmed the company's Speculative Grade Liquidity Rating at SGL-1.
"The upgrade of the CFR reflects the continued progress in reducing leverage
through positive operating results and the reduction of outstanding debt,"
said Dean Diaz, a Senior Credit Officer at Moody's. In December
2010, Team Health redeemed the remaining $45.5 million
of senior subordinated notes with available cash and has bolstered organic
growth with acquisitions.
The stable outlook incorporates our expectation that the company will
continue to grow revenues and earnings despite reimbursement and payor
mix pressures. The outlook also anticipates that the company will
remain disciplined in its acquisition strategy and its expansion into
newer service areas.
The following ratings have been upgraded:
Corporate Family Rating, to Ba3 from B1
Probability of Default Rating, to Ba3 from B1
Senior secured revolving credit facility due 2012, to Ba3 (LGD3,
47%) from B1 (LGD3, 45%)
Senior secured term loan due 2012, to Ba3 (LGD3, 47%)
from B1 (LGD3, 45%)
The following ratings have been withdrawn:
Senior subordinated notes due 2013, B3 (LGD6, 94%)
The Speculative Grade Liquidity Rating was affirmed at SGL-1.
RATINGS RATIONALE
Team Health's Ba3 Corporate Family Rating reflects the modest level of
leverage and strong interest expense coverage realized through earnings
growth and debt repayment. It also reflects the company's
strong competitive position in a highly fragmented industry and stable
cash flow generation. However, the rating also reflect risks
around reimbursement and exposure to uninsured individuals, which
we believe could pressure revenue and earnings growth in the near to medium
term.
If the company addresses the upcoming maturity of its credit facility,
continues to see growth in revenue and EBITDA from existing business,
and can contiune to acquire new business without increasing leverage,
there could be upward pressure on the rating.
Conversely, if the company were to pursue material debt-financed
acquisitions or shareholder initiatives, Moody's could change the
outlook to negative or lower the rating. Further, if reimbursement
or payor mix pressures are expected to materially impact operating results
there could be additional downward pressure. Other negative factors
that could affect the rating include an increase in the level of uncollectible
accounts, an increase in medical malpractice claims in excess of
amounts reserved for or the inability to retain physicians and/or hospital
contracts.
Moody's last rating action on Team Health was on February 2, 2010,
when we upgraded the Corporate Family and Probability of Default ratings
to B1. Moody's also upgraded the ratings on its senior subordinated
notes to B3.
The principal methodologies used in this rating were Global Business &
Consumer Service Industry published in October 2010 and Loss Given Default
for Speculative-Grade Non-Financial Companies in the U.S.,
Canada and EMEA published in June 2009.
Team Health, a subsidiary of Team Finance, based in Knoxville,
TN, is a leading provider of physician staffing and administrative
services to hospitals and other healthcare providers in the US.
For the year ended December 31, 2010, Team Health recognized
net revenue less a provision for uncollectibles of approximately $1.5
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, 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
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.
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
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.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's upgrades Team Health's CFR to Ba3; upgrades credit facility to Ba3; outlook to stable
