S&P affirms DaVita; places debt on watch

Standard & Poor's said it affirmed its BB- corporate credit rating on DaVita, Inc. in light of its plan to acquire HealthCare Partners LLC for approximately $4.4 billion.

At the same time, the agency said it placed its BB credit rating on DaVita's senior secured debt on CreditWatch with negative implications because the size of this debt class may increase substantially relative to S&P's estimate of the enterprise's value in the event of default.

The agency also said it affirmed its B credit rating on DaVita's senior unsecured debt. The recovery rating on the senior secured debt is 2 and the recovery rating on the senior unsecured debt is 6.

"The affirmation of the corporate credit rating is based on a modest incremental increase in pro forma leverage, which we calculate at about 4.5x, and good cash flows generated by each entity, which will allow for some rapid deleveraging," said S&P credit analyst Gail Hessol in a news release.

The agency said it sees the acquisition as neutral to its view of DaVita's fair business risk profile.

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