Moody's rates new Mariner Health facility Ba3, notes B3

Moody's Investors Service said it assigned a rating of Ba3 to Mariner Health Care Inc.'s proposed bank credit facility and a rating of B3 to the company's proposed senior subordinated notes offering.

Ratings assigned include a Ba3 to the company's new $85 million senior secured credit facility due 2007 and new $135 million senior secured term loan B due 2009, as well as a B3 to the company's new $175 million senior subordinated notes due 2013.

Moody's also confirmed the company's existing B1 senior implied rating and its B2 senior unsecured issuer rating.

The outlook remains stable.

Moody's said the ratings reflect the company's high leverage, its thin margins, and Moody's concern that margins will continue to be pressured due to the industry-wide increase in costs for labor and for professional and general liability insurance and claims.

The ratings, however, also incorporate the anticipated improvement in the company's credit profile following the disposition of certain assets and as a result of the recent increase in Medicare rates. Mariner recently generated almost $100 million of proceeds for debt reduction through the sale of assets, and will benefit from an improvement in EBITDA of about $24 million due to the rate increase. Moody's noted that combined, the effect of these two events will enable Mariner to lower its leverage materially to a level similar to other nursing home credits in the rating category.

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