S&P lifts Genesis Healthcare

S&P said it raised the rating on Genesis Healthcare Inc.'s first-lien term loan to B from B- and removed it from CreditWatch, where it was placed with positive implications in March.

The agency also said it revised the recovery rating on this debt to 2 from 3.

The 2 recovery rating indicates 70% to 90% expected default recovery.

The action reflects an expectation that Genesis will apply about $85 million in proceeds from its completed divestiture of its home health and hospice business to pay down amounts on the first-lien term loan, S&P said.

The improvement in recovery prospects stems from the reduction in first-lien debt being substantially greater than the distressed value previously attributed to this asset in a recovery analysis, the agency said, and from the acquisition of certain new assets in recent quarters, which enhances the collateral available for recovery.

The B- corporate credit rating reflects an assessment of the company's business risk as weak and the financial risk profile as highly leveraged, S&P said.

The outlook is stable.

Despite its large scale and geographic reach, the company’s business risk profile is weak because of the high degree of competitiveness and continued reimbursement headwinds facing the nursing home industry, the agency said.

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