Moody's rates HealthCare Partners loans Ba3

Moody's Investors Service said it assigned Ba3 ratings with loss-given-default assessments of LGD2 (23%) to HealthCare Partners, LLC's new $280 million secured term loan B and $15 million secured revolver. The company's B1 corporate family rating was affirmed.

The outlook is stable.

Proceeds from the new loans will be used to fund the intended acquisition of JSA Holdings, Inc. and to refinance HealthCare Partner's existing bank borrowings. JSA will be a co-borrower on the new bank debt.

Moody's said the JSA acquisition should provide greater diversity from a geographic standpoint, reducing HealthCare Partners' dependence on its Southern California market.

Nevertheless, along with this added diversity comes the risk of investing in a new market with different payor and provider relationships. In the agency's opinion, a key risk for both companies is the growing tendency for patients not to choose HMO products, which work best for their integrated staff model practices. Additionally, payor concentration risk is relatively high, with HealthCare Partners deriving about 40% of revenues from PacifiCare and JSA generating almost all of its revenues from Humana.

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