Moody's upgrades Sun loan

Moody's Investors Service said it affirmed the corporate family and probability of default ratings of Sun Healthcare Group, Inc. following news that the company completed an amendment of its senior secured credit facility.

Moody's also said it upgraded the ratings on the facility to Ba1 (LGD 2, 17%) from Ba2 (LGD 2, 23%) to reflect the decrease in the expected loss of the instrument associated with the $50 million repayment of term loan made in conjunction with the closing of the amendment.

The outlook is stable.

Moody's also said it downgraded Sun Healthcare's speculative-grade liquidity rating to SGL-3 from SGL-2, reflecting an expectation that the company's liquidity position over the next 12 to 15 months will weaken.

However, the agency said it believes the company will be able to manage compliance with the covenants required in its credit agreement over the forecast period through the further repayment of its term loan with available cash and cash flow.

The ratings consider the company's good track record of organic growth, which has contributed to improved margins and stable cash flow generation, Moody's said.

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