Moody's cuts Quorum Health

Moody's Investors Service said it downgraded Quorum Health Corp.'s corporate family rating to Ca from Caa1, its probability of default rating to Ca-PD from Caa1-PD and the company's senior secured term loan to Ca from Caa1.

“The downgrade of Quorum Health's ratings reflects Moody's view that the probability of default is very high and that the recovery rate for the company's debt will be low. Moody's expects continued pressure on the company's profitability in the next few quarters. The company will have to meet the timebound asset sale and debt prepayment required by the third amendment to its lender credit agreement. As Quorum Health continues to sell its assets, there is uncertainty on the realized value of the remaining hospitals to allow the company to meet its financial obligations.

“The company's debt/EBITDA (Moody's adjusted basis) spiked to more than 25 times at the end of September 2022 from high-six times a year ago. A large part of the leverage increase was due to extremely weak earnings in the third and fourth quarters of 2022. The company experienced declining revenues and a surge in operating expenses in 2022, as it struggled with staff turnover and increased contract labor costs,” the agency said in a statement.

The outlook is negative.

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