Moody's assigns KAH B3, loans B2, Caa2

Moody's Investors Service said it assigned a B3 corporate family rating and a B3-PD probability of default rating to Charlotte Buyer, Inc. (Kindred at Home Hospice or KAH Hospice). Concurrently, Moody's assigned B2 ratings to the company's planned $400 million revolving credit facility, $1.2 billion first-lien term loan, and $400 million term loan A. Moody's also assigned a Caa2 rating to the company's proposed $450 million second-lien term loan.

“The B3 CFR reflects KAH Hospice's modest size and scale, the presence of considerable competition in a highly fragmented industry and high initial Moody's adjusted debt to EBITDA of approximately seven times based on the LTM period ended Dec. 31, 2021, following the financing of a majority ownership stake by CD&R. The rating also reflects the risk arising from the company's predominantly narrow focus on providing hospice services and the high revenue concentration from Medicare, each accounting for over 80% of total revenue,” Moody’s said in a press release.

Private equity sponsor Clayton, Dubilier & Rice will use the proceeds and nearly $1.4 billion in new and rolled-over equity to fund the $3.4 billion purchase of a 60% stake in KAH and pay related fees and expenses. Humana will maintain a 40% stake in KAH Hospice.

The outlook is stable.

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