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Moody's: Kindred notes B3
Moody's Investors Service said it assigned a B3 (LGD 5, 81%) rating to Kindred Healthcare, Inc.'s offering of $550 million of senior unsecured notes due 2019.
The agency also said it affirmed Kindred's B1 corporate family and probability of default ratings, SGL-2 speculative-grade liquidity rating and Ba3 rating (with its LGD 3, 39% revised from LGD 3, 38%) on its $700 million senior secured term loan due 2018.
The proceeds will be used to fund the acquisition of RehabCare Group, Inc. and to refinance Kindred's existing debt, Moody's said.
The agency also said it affirmed RehabCare's $125 million senior secured revolver due 2014 at Ba3 (LGD 3, 30%), $450 million senior secured term loan due 2015 at Ba3 (LGD 3, 30%), corporate family rating at Ba3, probability of default rating at B1 and speculative-grade liquidity rating at SGL-2.
The outlook is stable.
The ratings remain unchanged and will be withdrawn at the close of the transaction, at which time the debt will be retired, the agency said.
The rating actions are subject to the conclusion of the transaction, as proposed, and Moody's review of final documentation.
The ratings reflect an expectation that the Kindred will operate with considerable leverage following the acquisition of RehabCare, Moody's said.
While the agency said it anticipates that the company will focus on reducing leverage following the transaction, free cash flow generation is expected to be modest in the near term as ongoing capital projects are completed.
The ratings also consider the high reliance on the Medicare program related to the company's hospitals, which will be the predominant revenue and earnings contributor of the combined company, Moody's added.
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