Moody's may lower Prospect Medical

Moody's Investors Service said it placed Prospect Medical Holdings, Inc.'s B3 corporate family rating, B2 first-lien senior secured debt rating and Caa2 second-lien senior secured debt rating on review for possible downgrade.

The company was unable to meet the deadline for filing its 10-K and said the delay was related to a review and restatement of the financials of Alta Healthcare System, Inc., which Prospect Medical acquired in August. Moody's noted that the delay and restatement may cause a breach of the covenants in the company's credit facility.

The review will focus on the magnitude of the restatement and its impact on the terms of the credit agreement as well as the potential impact and disruption with respect to the future operations of Alta Healthcare. Moody's will also analyze projected earnings streams in light of the disclosure of reduced pre-tax income due to Prospect Medical's ongoing significant increase in spending.

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