Moody’s cuts MultiPlan, rates notes Caa2

Moody's Investors Service said it downgraded MPH Acquisition Holdings LLC's (MultiPlan) corporate family rating to B3 from B2 and probability of default rating to B3-PD from B2-PD.

The downgrade follows the company's announcement that it will pay a $1.3 billion debt financed cash dividend to its owners.

In addition, the agency assigned a Caa2 rating to $1.3 billion of payment in kind toggle notes being issued to fund the dividend. The PIK notes will be issued at Polaris Intermediate Corp., a parent of MPH.

Moody's said it expects the company to forgo the PIK option, and pay interest on the PIK toggle notes in cash.

Concurrently, the agency affirmed the B1 rating on the company's first-lien credit facility, and the Caa1 rating on unsecured notes, both at MPH. The corporate family rating and probability of default rating will be moved to Polaris Intermediate Corp. following the close of the transaction.

The outlook is stable.

"The downgrade of the CFR reflects MultiPlan's very high financial leverage and aggressive financial policies as this is the second large debt funded dividend the company has taken since the LBO in June 2016," Moody's assistant vice president, analyst Todd Robinson said in a news release.

"While we note the company's solid organic growth and its strong margins and cash flow, we expect that debt to EBITDA will remain high at around 7 times and free cash flow to debt modest at around 5% in the year ahead."

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