Moody’s lowers HCP to negative

Moody's Investors Service said it affirmed HCP, Inc.'s Baa1 senior unsecured debt rating and revised the outlook to negative from stable.

The negative outlook reflects the operating challenges of its largest tenant, HCR ManorCare, which presents risks of a substantial cut to HCP's rent payments, Moody’s said.

The agency also said it believes that uncertainties surrounding HCR will continue to weigh on investor confidence in HCP, thus negatively impacting its capital costs as it looks to refinance upcoming maturities and grow.

Moody's also noted that HCR's fourth-quarter 2015 earnings came in well below expectations, leaving it to report normalized fixed-charge coverage of only 1.07x for 2015.

The agency said it is concerned that HCR's operating weakness will persist as the skilled nursing and post-acute provider contends with industry-wide challenges impacting its rates and occupancy.

Credit strengths supporting HCP's ratings include its large size and property-type diversification across five segments of health care, including very high quality life science and medical office building portfolios, Moody’s said.

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