Moody's affirms LabCorp

Moody's Investors Service said it assigned a Baa3 rating to Laboratory Corp. of American Holdings' proposed $500 million senior unsecured term loan due 2012 and $500 million senior unsecured term revolving credit facility due 2012 and affirmed its $350 million senior unsecured notes due 2013 and $250 million senior unsecured notes due 2015 at Baa3.

The outlook is stable.

The agency said the affirmation of LabCorp's ratings with a stable outlook reflects the benefit of the recent addition of several managed care contracts, better operating performance over the past two years and the continued shift to more proprietary esoteric and genomic testing. The ratings are also supported by the company's scale and leadership in the clinical laboratory market, solid cash flow generation and strong interest coverage.

The ratings, however, are constrained by the increase in outstanding debt to fund acquisitions of smaller laboratory companies and Moody's concern with the company's propensity to use free cash flow for share repurchases instead of reducing leverage, the agency said.

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