S&P gives B- to Kindred notes

Standard & Poor’s said it affirmed its B+ corporate credit rating on Kindred Healthcare Inc. The outlook is stable.

At the same time, S&P assigned a B- issue-level rating to the proposed $1.35 billion senior unsecured notes, to be issued in multiple tranches. The recovery rating on this debt is 6, indicating an expectation for negligible (0% to 10%) recovery for unsecured lenders in the event of a payment default.

The B- issue-level rating and 6 recovery rating on the company’s existing senior unsecured notes are unchanged.

The company will use proceeds of these unsecured notes to fund the acquisition of Gentiva for $1.8 billion and Centerre Healthcare Corp. for $195 million.

S&P also placed the B+ issue-level rating on the company’s secured term loan on CreditWatch with positive implications.

“The acquisition of Gentiva incrementally strengthens Kindred’s scale, product diversity, market position, and competitive advantage, as Kindred now offers services across the full continuum of post-acute care,” said S&P credit analyst David Kaplan in a news release.

Business risk, however, remains constrained by the company’s significant exposure to reimbursement risk from government payers across post-acute service lines, which is increasing incrementally with this transaction. The business risk assessment for Kindred is unchanged at “weak.”

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