Moody's trims ModivCare

Moody's Ratings said it downgraded ModivCare Inc.'s ratings, including the corporate family rating to B3 from B2, the probability of default rating to B3-PD from B2-PD, and the ratings on the senior unsecured notes to Caa1 from B3. The company's speculative grade liquidity rating is unchanged at SGL-3. The outlook remains stable.

The downgrade reflects a forecast for tight liquidity as cash flows continue to suffer from ongoing working capital pressure tied to contract payables and receivables in the non-emergency medical transportation (NEMT) business, delayed payments from a managed care client, and ongoing restructuring charges, Moody’s said.

However, in a press release, Moody's said it “expects cash flows to be slightly positive in 2024, but with continued quarterly volatility, as working capital pressures moderate and restructuring charges decline.”

The downgrade also reflects elevated leverage with debt to EBITDA at 5.7x at Dec. 31, up from 4.6x a year ago. “Moody's expects leverage to remain elevated over the next 12 to 18 months reflecting ongoing EBITDA pressure from Medicaid redeterminations and recent contract losses which Moody's expects to be largely offset by a ramping of new business secured in 2023 and cost savings,” the agency said.

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