S&P lifts Steward Health view to positive

S&P said it affirmed the B- corporate credit rating on Steward Health Care System LLC and revised the outlook to positive from stable.

The agency also said it affirmed the B- rating on the company's senior secured term loan. The recovery rating on this debt is 3, indicating 50% to 70% expected default recovery.

The outlook revision follows the company's restructuring of its pension obligations, which will materially improve the company's balance sheet and cash flow prospects, S&P said.

Pro forma for the pension obligation restructuring, the company's underfunded pension balance is reduced by over $200 million, the agency said, and required annual cash contributions to the company's pension plans decline by about $30 million.

As a result, S&P said it expects leverage to decline to about 3x in 2016 and the company to generate about $15 million to $20 million in discretionary cash flow, a meaningful departure from previous expectations.

Still, the company has not yet generated cash flow over the past four years, the agency added.

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