Moody's rates Genesis Care loans B1

Moody's Investors Service said it assigned a definitive B1 rating to the senior secured term loan B facility entered into by Genesis Specialist Care Finance UK Ltd., a 100%-owned and guaranteed subsidiary of Genesis Care Finance Pty Ltd., and changed the outlook to negative from stable. Moody's also assigned a B1 senior secured rating to the senior secured term loan B facility entered into by Orion Merger Sub, Inc., also a 100%-owned and guaranteed subsidiary of GenesisCare, with a negative outlook. The agency changed the outlook for Genesis Care to negative from stable.

Moody's changed the outlook to negative from stable reflecting elevated financial leverage, as measured by Moody's adjusted debt/EBITDA, which has been sustained above the rating tolerance threshold of 6x, as the company continues to expand. This is largely due to lease commitments for new clinics, as well as the ramp-up period between opening new clinics and reaching full earnings capacity.

Moody's forecasts funding for the proposed acquisition of 21st Century Oncology, Inc. will lead to leverage increasing to around 7x in FY2020. From a credit perspective, Moody's said it would regard this degree of leverage, combined with potential integration and execution challenges, as tempering the substantial improvement in scale and geographic diversification arising from the acquisition.

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