Moody’s might lower Kindred

Moody's Investors Service said it placed the ratings of Kindred Healthcare, Inc., including the B1 corporate family rating, under review for downgrade following the announcement that the company entered into a definitive agreement to acquire Gentiva Health Services, Inc.

Under the terms of the agreement, Gentiva shareholders will receive $14.50 per share in cash and $5.00 of Kindred common stock. The transaction is valued at $1.8 billion, including the refinancing of Gentiva's debt.

The transaction is expected to close in the first quarter of 2015.

"We acknowledge the compelling strategic rationale for the acquisition of Gentiva, but estimate that adjusted debt to EBITDA will initially be quite high at approximately 6.0 times," Moody's senior vice president Dean Diaz said in a news release.

"Our review of Kindred's B1 corporate family rating will focus on the company's ability to reduce leverage to publicly disclosed targets over the next two years while successfully integrating Gentiva's operations."

"If we become comfortable that Kindred can meet its leverage targets, we could confirm Kindred's ratings at current levels. If we do lower Kindred's ratings, given our current expectations, we do not expect that we would lower the company's Corporate Family Rating greater than one notch," Diaz added in the release.

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