Moody’s Investors Service assigned a B2 corporate family rating to National Surgical, including its pending $220 million loan package it will use to back Irving Place Capital’s investment. The rating outlook is stable, Moody’s said.
Moody’s said the B2 rating reflects the fact that NSH will have “considerable” leverage follow IPC’s buy. Dean Diaz, a Moody’s VP and senior credit officer, said NSH will have 5.4x adjusted debt to EBITDA. NSH recognized about $286 million in revenue for the 12 months ended Sept. 30, Moody’s said.
Earlier this week, Irving Place Capital announced a deal to buy Chicago-based NSH, which owns and operates a network of 14 surgical hospitals and seven ambulatory surgery centers. Financial terms weren’t disclosed.
Jefferies on Friday is expected to launch NSH’s $220 million debt package, which includes a $20 million revolver, a $170 million term loan and a $30 million delay draw term loan, according to Thomson Reuters Loan Pricing Corp. IPC is using the proceeds to fund its acquisition of NSH from Ferrer Freeman, Charlesbank Capital Partners and JP Morgan Asset Management.
With its B2 rating, Moody’s noted the relatively small scale of NSH, the expectation that NSH will likely have an aggressive acquisition strategy and that it will likely face unfavorable regulatory scrutiny. “While healthcare reform legislation did not require changes to the current ownership structure of the company’s facilities, it limits the ability to open new facilities or add beds at existing facilities,” Moody’s said in a statement. “However, the ratings also consider the company’s plan to grow revenue at existing facilities through service line extensions and the relatively favorable payor mix at its hospitals, which limits exposure to uncompensated care costs.”
The stable rating outlook reflects Moody’s expectation that NSH will continue to drive same store revenue growth, which should provide an opportunity to cut leverage through EBITDA growth.