S&P gives US Radiology, loans B-

S&P said it assigned B- ratings to US Radiology Specialists Holdings LLC and its planned first-lien debt. The recovery rating on the debt to be issued by subsidiaries US Radiology Specialists Inc. and US Outpatient Imaging Specialists Inc. is 3, indicating an expectation for meaningful (50%-70%; rounded estimate: 50%) recovery in default.

US Radiology’s proposed first-lien debt includes a $100 million first-lien revolving credit facility due 2025 (undrawn at close), a $790 million first-lien term loan due 2027, and a $135 million first-lien delayed-draw term loan to refinance its $619 million term loan and undrawn $45 million revolving credit facility to finance three near-term acquisitions, provide capacity for future acquisitions and cover transaction-related expenses.

“The company’s rating is constrained by the small scale of operations and a narrow focus on radiology and imaging services, as well as estimated leverage of 7x-7.5x, pro forma for targeted acquisitions,” S&P said in a press release.

The outlook is positive. “Our positive outlook reflects our belief that the company could sustain an adjusted ratio of free operating cash flows to debt of 3% or more if acquisition activity is moderate, though we see some risk to this forecast given heavy consolidation activity in radiology sector,” the agency said.

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