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Moody's ups Select Medical loan, cuts notes
Moody's Investors Service said it upgraded Select Medical Corp.'s proposed senior secured credit facility, consisting of a $300 million revolver due 2016and an $850 million term loan due 2018 to Ba3 (LGD 3, 30%) from B1 (LGD 3, 41%). Select Medical is a wholly owned subsidiary of Select Medical Holdings Corp., the agency said.
Moody's downgraded Select Medical's 7.625% senior subordinated notes due 2015 to Caa1 (LGD 5, 81%) from B3 (LGD 4 62%).
The company's B2 corporate family and probability of default ratings remain unchanged. The outlook is positive.
The downgrade follows the announcement that the proceeds from the proposed term loan would be reduced from its originally proposed $1.2 billion and the announcement that the company will no longer tender for the full amount of outstanding subordinated notes, the agency said.
The proceeds of the new credit facility will be used to refinance Select Medical's existing bank debt and fund the tender for a portion of the company's subordinated notes. The senior floating-rate notes at the parent holding company level will remain part of the capital structure as originally anticipated.
The ratings reflect the expectation that the company will continue to operate with considerable financial leverage and that the company's reliance on the specialty hospital segment for the majority of its EBITDA results in a concentration of revenue from Medicare, the agency added.
However, the ratings are supported by the expectation that the company will continue to generate strong free cash flow that can be used to repay debt as well as Select Medical's considerable scale and position, the agency said.
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