Moody's rates Matria converts B3

Moody's Investors Service said it assigned a rating of B3 to Matria Healthcare Inc.'s proposed offering of $75 million convertible senior subordinated notes due 2024.

Moody's also placed all ratings for the company under review for possible downgrade, including the B1 senior implied rating and B2 senior unsecured issuer rating.

Moody's placed all ratings under review as a result of the anticipated increase in leverage following the tender offer for the company's 11% senior notes. Moody's action also considers the recent decline in operating performance reported for the first quarter of 2004. The review will be concluded in the near term.

The current ratings reflect additional concerns including the volatility of historical operating performance, the potential for increase competition, including from major pharmacy benefit managers, and the concentration of revenues at Facet.

Moody's said positive factors reflected in the current ratings include the favorable performance trend of the company's health enhancement business segment, the company's strong market position in its maternity and diabetes business, the potential for strong growth in disease management services, which the Centers for Medicare and Medicaid Services has recently endorsed, and favorable healthcare growth dynamics driven by demographic trends and the increasing incidences of chronic diseases, including diabetes.

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