Moody's cuts Healthways

Moody's Investors Service said it downgraded Healthways, Inc.'s corporate family rating to Ba3 from Ba2 and probability of default ratings to B1 from Ba3.

Moody's also said it downgraded the $345 million revolving credit facility due 2013 to Ba3 (LGD 3, 31%) from Ba2 (LGD 3, 31%) and $200 million term loan B expiring 2013 to Ba3 (LGD 3, 31%) from Ba2 (LGD3, 31%).

The speculative-grade liquidity rating is unchanged at SGL-2.

The outlook is negative.

The downgrade reflects the loss of Healthways largest customer, Cigna HealthCare, Inc., Moody's said.

The contract, which ends in 2013 and begins winding down in fiscal 2012, represents about 16% of total revenues or $115 million in fiscal year 2011, the agency said.

The expected revenue loss in 2012 will be about $65 million and projections don't include the company recapturing any of the business, as it begins direct marketing to Cigna members, Moody's said.

The ratings are constrained by the company's relatively small revenue base, customer concentration and ongoing challenges within the health care industry, the agency added.

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