Fitch upgrades Coventry

Fitch Ratings said it removed Coventry Health Care, Inc.'s ratings from Rating Watch positive and upgraded the company's long-term issuer default rating to A from BBB.

Fitch also said it upgraded the ratings on Coventry's senior unsecured securities to A- from BBB-.

The outlook is negative.

The upgrades follow the close yesterday of Coventry's previously announced acquisition by Aetna Inc. for Aetna common shares and cash totaling $6.9 billion and aligns the ratings on Coventry's senior unsecured notes with Aetna's current ratings.

The upgrades reflect a view that following the transaction, the combined entity will benefit from significantly stronger market positioning, larger absolute earnings and revenues bases and enhanced benefits from economies of scale than Coventry possessed on a stand-alone basis, Fitch said.

The upgrades also consider an expectation that Coventry's operating company subsidiaries will ultimately be rebranded and fully integrated into Aetna's organization, the agency said.

These expected benefits are partially offset by a projected increase in the combined entity's financial leverage and the possibility of a modest reduction in interest-coverage levels relative to Coventry's recently reported levels, depending on the combined operating performance of the two companies going forward, Fitch said.

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