Moody’s rates WellCare Health notes Ba2

Moody's Investors Service said it confirmed the Ba2 senior debt rating of WellCare Health Plans, Inc.

The agency also assigned a Ba2 rating to WellCare's anticipated issuance of $700 million in new debt to finance the planned acquisition Meridian Health Plan of Michigan, Inc., Meridian Health Plan of Illinois, Inc. and MeridianRx for $2.5 billion.

To fully finance the transaction, WellCare also plans to borrow about $450 million to $500 million on its revolving line of credit, issue $1.1 billion of new equity with ability to upsize and use about $300 million in cash.

The outlook is stable.

The confirmation concludes the review for downgrade announced in May and reflects that the impact of the acquisition will have a more moderate impact on leverage than originally expected, the agency said.

Moody's said it now believes that leverage, as measured by adjusted debt to capital, will remain below 40% and adjusted debt to EBITDA, which was 1.9x as of year-end 2017, will be below 2.5x by year-end 2019.

The agency also said that WellCare's solid results in the first half of 2018, including $513 million in adjusted EBITDA and $253 million in net income along with recent business wins and the Illinois Medicaid expansion bolster its confidence regarding the firm's ability to delever.

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