Moody's upgrades MMM Holdings

Moody's Investors Service said it upgraded the senior debt rating of MMM Holdings Inc. and NAMM Holdings Inc. to B1 from B2 and the corporate family rating of MMM Holdings to B1 from B2. The insurance financial strength ratings of MMM Healthcare Inc. and PrimeCare Medical Network Inc. were affirmed at Ba2.

The outlook is stable.

Moody's said the key driver of the rating upgrade was the repayment of $165.3 million of debt at MMM and NAMM. Parent company Aveta Inc. used a portion of the proceeds it received from a private equity offering in December to repay a portion of the debt at MMM and NAMM that included $132.5 million of the outstanding $420 million term loan and the full repayment of $32.8 million of subordinated debt.

These actions reduced debt to EBITDA to 2.5x from 4.0x as of Dec. 31 and EBITDA to interest expense is expected to increase to 6.4x during 2006 versus the previously projected 4.1x prior to the debt repayment, the agency said.

The ratings reflect the companies' leveraged capital structure, a short operating history, dependence on the Medicare Advantage product and geographic concentration in Puerto Rico, the agency said, as well as the uncertainty that surrounds the future financial prospects of the Medicare program.

Moody's said the ratings are supported by solid 2005 results, with Medicare membership exceeding 130,000 members and net margins of roughly 5% anticipated. The agency added that, given the current Medicare reimbursement rates and market situation in Puerto Rico, similar results are expected during 2006.

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