Moody's downgrades Greenway

Moody's Investors Service said it downgraded Greenway Health, LLC's corporate family rating to Caa1 from B3 and probability of default rating to Caa1-PD from B3-PD. Moody's also downgraded the ratings on the senior secured bank credit facilities to Caa1 from B3. The outlook is negative.

The downgrade reflects Moody's expectations of ongoing operating challenges over the next year following a sharp decline in the company's earnings and weakened liquidity as a result of the settlement reached with the U.S. Department of Justice for $57.3 million in February 2019.

Greenway also incurred associated expenses during 2019 to implement mandated requirements and ensure product compliance. Moody's expects some of these costs to continue into 2020 and 2021. Accordingly, Moody's said it projects the company to sustain very high leverage of around 10x adjusted debt-to-EBITDA with negative free cash flow in 2020.

In addition, class action litigation is in the early stages, which means there is a high level of uncertainty related to potential liabilities.

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