The latest S&P rating is somewhat improved over previous, though still negative - but S&P has had a negative outlook on IHS for, what, six months now? Call me unrealistic, but this seems like a "plus" to me:
(Press release provided by Standard & Poor's).
NEW YORK, Aug 27 - Standard & Poor's today assigned its
single-'B' rating to Integrated Health Services Inc.'s $250
million senior subordinated notes due 2008. A double-'B'-minus
rating also has been assigned to the company's $1.0 billion
revolving credit facility and $750 million term loan due 2004.
The company's existing double-'B'-minus corporate credit
and bank loan ratings, and single-'B' subordinated debt rating
were affirmed.
Owings Mill, Md.-based Integrated's speculative-grade
ratings reflect the company's aggressive transition toward
becoming a full-service alternate-site health care provider,
and its limited cash flow relative to its heavy debt burden.
Integrated has grown rapidly through acquisitions to
diversify as a provider of post-acute and home care services,
operating in over 1,000 locations in 45 states.
Pending transactions include Rotech Medical Corp., a large
home health care firm, Coram Healthcare Corp.'s lithotripsy
division, and Community Care of America, an operator of rural
nursing facilities.
These highlight Integrated's active efforts to broaden its
health care service offering and geographic presence in an
attempt to become more attractive to managed care organizations
and other payors seeking to provide health care in the
lowest-cost setting.
Still, the company will be greatly challenged to control,
integrate, and further expand operations that were only a
quarter of their current size just three years ago. Moreover,
there is continuing uncertainty with regard to the adequacy of
reimbursement from government-sponsored programs for the
indigent and elderly.
Financially, Integrated's heavy use of borrowing for
expansion limits cash flow coverage of lease-adjusted debt to
levels consistent with a relatively low rating.
The bank facility is rated double-'B'-minus, the same as
the corporate credit rating.
Although the facility derives strength from its secured
position, based on Standard & Poor's simulated default
scenario, it is not clear that a distressed enterprise value
will be sufficient to cover the entire loan facility.
OUTLOOK: NEGATIVE
While the company has used equity to balance its need for
growth capital, there is the potential that a large
debt-financed acquisition could lead to a ratings downgrade. |
