S&P puts Genesis loan on positive watch

Standard & Poor’s said it placed the B- rating on Genesis Healthcare Inc.’s first-lien term loan on CreditWatch with positive implications.

This follows news that the company signed a definitive agreement to sell its home health and hospice business to Compassus for $84 million, S&P said.

The company plans to use proceeds to pay down amounts on the first-lien term loan, given that these assets are collateral for the term loan.

S&P said it expects to revise the recovery rating on the company’s first-lien term loan to 2 from 3and raise the rating to B from B- when the transaction closes.

This improvement in recovery prospects stems from the reduction in first-lien debt being substantially greater than the distressed value attributed to this asset in the recovery analysis, the agency said.

Pro forma for the transaction, the 2 recovery rating on the first-lien term loan indicates 70% to 90% expected default recovery.

Genesis indicated plans to continue to exit underperforming, nonstrategic assets and apply subsequent sale proceeds to further pay down its term loan, S&P added.

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