Moody's upgrades MedImpact

Moody's Investors Service said it upgraded MedImpact Holdings, Inc.'s corporate family rating to B3 from Caa1, probability of default rating to B3-PD from Caa1-PD and senior secured notes to Caa2 (LGD5, 80%) from Caa3 (LGD5, 88%). The speculative grade liquidity rating was affirmed at SGL-3. The outlook is stable.

MedImpact announced plans to acquire Medical Security Card Co., LLC and Apex Affinity, Inc., and it is asking bondholders to consent to it raising another $160 million of secured notes to help fund these transactions.

The upgrade reflects Moody's expectation that the company will see steady financial performance, aided by recent contract wins, and will delever over the next 12 to 18 months. Furthermore, the agency said the proposed acquisitions will enhance the company's product lines and provide opportunities to realize cost and revenue synergies.

Pro forma for the acquisitions, the company's debt-to-EBITDA ratio will rise from about 4.9 times to about 5.4 times based on financial results for the 12 months ended March 31. Moody's expects leverage to moderate, absent any additional large acquisitions, dropping to 5.0 times or below by the end of 2014.

The B3 corporate family rating reflects the company's very high leverage, small revenue base, cash flow that is dependent on working capital benefits and aggressive financial practices stemming from a highly concentrated ownership structure, Moody's said.

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