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Biotech / Medical : Novacare (NOV) breaking out...
NOV 15.63+0.6%9:30 AM EST
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To: Jim Oravetz who wrote (371)3/2/1999 12:48:00 PM
From: Jim Oravetz   of 420
 
Novacare Inc, Conv Sub Debs Cut By Moody's; Outlook Neg
NEW YORK (Dow Jones)--Moody's Investors Service Inc. said it downgraded the rating assigned to NovaCare, Inc.'s $175 million convertible subordinated debentures due January 2000 to single-B2 from single-B1.
The senior implied rating is Ba3, and the rating outlook has been changed to negative the rating agency added. NovaCare is a national provider of physical rehabilitation, occupational health and employee services.
Moody's said: "The rating action reflects the significant weakening in the company's operating performance, primarily resulting from the long-term care industry's transition to the Prospective Payment System (PPS) for Medicare reimbursement, which became effective for the majority of the industry on Jan. 1. Revenues have been adversely impacted by a sharp decline in the utilization of the company's long-term care contract therapy services. Operating margins for long-term care services have suffered from both the decline in volume and from reductions in reimbursement levels under PPS.
"Moody's will continue to closely monitor the company's progress in improving its operating performance in the face of the radically altered business environment.
"The negative rating outlook stems primarily from the fact that the company has a large debt maturity pending, as the $175 million convertible subordinated notes are due on January 15, 2000. Moody's notes, however, that company is expected to take significant actions to recapitalize its balance sheet prior to the maturity date."

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