S&P rates Cano B

S&P said it gave Cano Health Inc. a B issuer rating. Cano Health completed its merger with JAWS Acquisition Corp., parent company, renamed Cano Health Inc. The company used the proceeds from the transaction to repay $400 million on its senior secured term loan and fund $492 million of cash to the balance sheet.

The agency raised the issue-level rating to B from B-, and removed it from CreditWatch with positive implications, on Cano Health's senior secured credit facility, consisting of a $30 million five-year revolver (undrawn), $254 million remaining on its first-lien term loan due 2027, and a new $295 million incremental term loan B due 2027, issued through wholly owned subsidiary, Cano Health LLC.

Proceeds from the incremental term loan will be used to partially fund the acquisition of University Health Care. The recovery rating on the debt is unchanged at 3. This rating had also been placed on CreditWatch with positive implications Dec. 2, 2020.

“The upgrade on Cano Health's debt reflects lower adjusted leverage and improving prospects. We still consider the company to be highly leveraged but believe that, given its continued rapid growth, aided by debt-financed acquisitions, and growing track record of performance and future positive free cash flow generation, that leverage will steadily decline,” the agency said in a press release.

S&P said it assigned a stable outlook. “Our stable outlook reflects our expectation that Cano Health will continue to expand its presence in the fast-growing Medicare Advantage market, improve its margins as it benefits from leveraging its increased size and scale, and that its adjusted debt leverage will steadily decline to the near-5x area over the next two years.”

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