Moody’s downgrades CHG first-lien loan

Moody’s Investors Service said it affirmed the B2 corporate family rating of CHG Healthcare Services and downgraded the ratings on its first-lien secured credit facilities to B2 (LGD 3) from B1 (LGD 3).

The rating on the secured credit facilities, which include a $100 million revolver due 2017 and a $771 million term loan due 2019, was downgraded due to the repayment of second-lien debt that will ensue from a proposed add-on to the term loan facility.

The outlook is stable.

CHG recently announced plans to increase the size of its first-lien term loan to $771 million from $571 million, Moody’s said.

The proceeds will be used to repay the entirety of its $193 million second-lien term loan, the agency said.

The transaction is nearly debt-neutral, Moody’s said. Although it will result in a $9 million reduction in interest expense, it does not prompt a change to the company’s corporate family rating, the agency added.

But with the sizable amount of second-lien debt that is being replaced by the proposed incremental term loan, the ratings on the first-lien credit facilities are no longer supported by substantial amount of first-loss debt junior to these facilities, Moody’s explained.

The ratings also reflect the company’s modestly-sized, but highly concentrated revenue base, high debt levels and recent history of aggressive financial policies pursued by shareholders, the agency said.

These limiting factors are offset by CHG’s lead market position and favorable secular demand trend in its key locum tenens segment, Moody’s said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.