S&P assigns ScionHealth, loans B

S&P said it assigned B ratings to ScionHealth (Knight Health Holdings LLC) and its upcoming $450 million term loan due 2028. The loan’s recovery rating is 3, indicating an expectation for meaningful (50%-70%; rounded estimate: 60%) recovery in default.

Knight Health plans to buy the long-term acute-care business of Kindred Healthcare and 18 short-term acute-care hospitals from LifePoint Health. It plans to employ a new, unrated $450 million asset-based revolver with $100 million drawn at close, the term loan, $350 million in class B preferred equity and $10 million in common equity.

“Our rating reflects the company's slow but stable revenue growth and modest cash flow generation. Knight Health's LTAC business, which will account for about 60% of its revenue, is a slow growing, mature business. Over the past several years, excess industry capacity has been reduced through the active closure or conversion of facilities by several industry participants, resulting in a financially healthier marketplace,” S&P said in a press release.

The outlook is stable, reflecting a forecast for modest, but steady patient volume growth in each business as the coronavirus pandemic eases, leading to low-single-digit organic revenue growth over the next two years, the agency said.

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