Moody's rates Manor Care convertible Baa3

Moody's Investors Service said it assigned a Baa3 rating to Manor Care's $93 million in new exchange convertible senior notes due 2023. These notes were offered in conjunction with an exchange offer that expired on Dec. 2.

At the same time, Moody's affirmed Manor Care's existing Baa3 ratings, including that on the remaining $7 million in convertible senior notes. The outlook is stable.

Manor Care has offered to exchange these contingent convertible notes for new notes to avoid share dilution under new accounting guidelines. Under terms of the new notes, any put or conversion (up to the principal amount) must be satisfied with cash versus equity. Moody's views this as an additional liquidity constraint.

However, Moody's said it believes that a conversion scenario would be expected to occur at a time when Manor Care's stock price has increased and the company would likely have access to its bank facility.

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