Moody’s eyes Acadia for upgrade

Moody’s Investors Service said it placed Acadia Healthcare Co., Inc.’s ratings on review for upgrade, including its B2 corporate family rating and B2-PD probability of default rating. Moody’s also placed Acadia’s senior secured ratings upgrade at Ba2 and its senior unsecured ratings at B3 on review for upgrades.

The agency upgraded Acadia’s speculative grade liquidity rating to SGL-1 from SGL-3 and placed Acadia’s outlook on review.

The rating action follows the completion of Acadia’s sale of its U.K. operations to Waterland Private Equity for about £1.078 billion, the agency said.

“This transaction is credit positive because it will facilitate deleveraging and rid the company of a challenged business. These benefits more than offset the significant loss of scale and geographic diversity as a result of the divestiture, ” said Jonathan Kanarek, a Moody’s vice president-senior credit officer, in a press release.

The change in the SGL rating to SGL-1 reflects its successful divestiture of a large yet challenged business and the expectation Acadia will generate consistently positive free cash flow over the next 12-18 months while maintaining good cash balances and significant access to its revolving credit facility, the agency said.

Moody’s said the review process will focus on Acadia’s new capital structure and any potential financial policy changes.

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