Moody's rates Ardent loan B1

Moody's Investors Service said it assigned a B1 rating to Ardent Health Services Inc.'s proposed $275 million senior secured add-on term loan B due 2011.

Moody's also downgraded the rating on the company's existing senior secured revolver to B1 from Ba3, due to the decrease in collateral coverage resulting from the increase in the amount of committed senior secured debt. All other ratings for the company were confirmed, including the $225 million senior subordinated notes due 2013 at B3.

The outlook remains stable.

Moody's said the ratings reflect Ardent's high leverage, which will increase further due to the acquisitions, the company's acquisition strategy, the significant capital expenditures requirement, the lack of free cash flow generation historically and anticipated for the near term, and the company's low margins.

Mitigating factors include the company's favorable performance and success to date in improving the operations of acquired facilities, the company's strong market position in Albuquerque and Tulsa, Okla., and Eastern Oklahoma, two markets which will account for about two thirds of the company's pro forma EBITDA, favorable industry fundamentals driven by the decline in capacity for the behavioral hospital sector, from which the company generates about 30% of its EBITDA, the stable Medicare reimbursement environment for acute care hospitals, the potential benefits to the company's behavioral segment from Medicare's transition to a prospective payment system, and positive long term demographic trends.

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