Moody's cuts Sevita

Moody's Investors Service said it lowered National Mentor Holdings Inc.'s (Sevita) corporate family rating to B3 from B2, probability of default rating to B3-PD from B2-PD, senior secured first-lien credit facilities ratings to B3 from B1 and senior secured second-lien term loan rating to Caa2 from Caa1. The agency also changed the outlook to stable from negative.

The actions follow Sevita's reported $200 million incremental term loan. “The downgrade to B3 reflects the aggressive nature of Sevita's financial policies, a key governance issue. Sevita's leverage is elevated at 6.9x due in part to a $300 million shareholder distribution earlier in the year. Moody's forecasts that leverage will remain over 6x for the next 12 -18 months after including the announced debt-funded acquisitions,” the agency said in a press release.

Sevita will use the proceeds to repay the amount outstanding on its revolving credit facility that was used to fund recent acquisitions and to also fund future acquisitions that are expected to close by early 2022.

“The change in outlook to stable reflects the company's good track record of business execution. Further, Moody's believes that industry trends will continue to shift to smaller, lower-cost community settings, which will support future growth for Sevita,” Moody’s said.

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