S&P: Global Healthcare second-lien loan CCC+

S&P said it affirmed its B corporate credit rating on Global Healthcare Exchange LLC.

The outlook remains stable.

In addition, the agency affirmed its B rating to Global Healthcare’s secured first-lien credit facility, but revised the recovery expectation in this debt to 3 from 4. The 3 recovery rating indicates expectations for meaningful recovery (50%-70%, lower half of the range) in the event of a payment default.

At the same time, S&P assigned a CCC+ rating to the company’s proposed second-lien term loan. The recovery rating on this debt is 6, indicating expectations for negligible (0%-10%) recovery in a default.

S&P said the revision to the first-lien recovery expectations reflects its modestly revised enterprise value at default and the significant cushion provided by the second-lien.

The agency views view Global Healthcare’s proposed dividend as credit neutral, due to the retirement of preferred stock that the agency treats as debt. The transaction is a debt-for-debt refinancing by S&P’s calculations, with an immaterial increase in adjusted leverage in its forecast for fiscal year-end 2016 – though funded debt to EBITDA does increase to 7.3 times from 5.5 times.

The incremental interest burden from the added debt is not significant enough for the agency to change its view of the company’s financial risk, given the company's solid cash flow generation and relatively strong interest coverage metrics.

From an operations standpoint, Global Healthcare’s revenue and EBITDA continue to grow in line with S&P’s expectations.

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