Moody's rates Healthways loans Ba2

Moody's Investors Service said it assigned a Ba2 rating with loss-given-default assessments of LGD3 (31%) to Healthways, Inc.'s proposed $400 million revolver and a $200 million term loan B. The agency also assigned a Ba2 corporate family rating, Ba3 probability-of-default rating and SGL-1 speculative grade liquidity rating to the company.

The outlook is stable.

The proposed credit facilities are intended to partially fund the acquisition of Axia Health Management, Inc.

The agency said the ratings reflect Healthways' strong revenue growth, sizable margins and solid financial metrics and Moody's expectations that Healthways will benefit from favorable demographic trends, increased scale associated with the acquisition and expanded scope into the health support market. Moody's expects the combined company to maintain stable margins over the intermediate term while paying down amounts drawn on the revolver to fund the acquisition.

The ratings are constrained by the continued customer concentration and relatively small revenue base, the agency said. Furthermore, the intended acquisition is the largest in the company's history and the ratings reflect integration risk and Moody's expectation of a continued acquisition strategy. Additionally, the ratings acknowledge the potential risks associated with revenue and earnings volatility as a result of Medicare Health Support pilot programs.

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