Moody's downgrades ATI Holdings

Moody's Investors Service said it downgraded the ratings of ATI Holdings Acquisition, Inc. and placed the ratings under review for further downgrade. Moody's lowered the corporate family rating to B2 from B1, the probability of default rating to B2-PD from B1-PD, and the first-lien senior secured bank credit facility to B2 from B1. The agency also trimmed the speculative grade liquidity rating was downgraded to SGL-2 from SGL-1.

“The downgrade of the CFR to B2 was prompted by the company's announcement of its second quarter 2021 earnings and its material downward revision of earnings guidance for year-end 2021. The revision was due to the acceleration of attrition among ATI's physical therapists in the second quarter and third quarters of 2021, combined with the intensifying competition for clinicians in the labor market,” Moody’s said in a press release.

Management forecasts higher labor costs, which Moody's said it believes will drive higher leverage.

“Moody's believes that governance was a factor in the downgrade given the material change in earnings forecast only weeks after closing the company's acquisition by a special purpose acquisition company (SPAC). This calls into question management's credibility and their ability to reasonably forecast future results,” the agency said.

The review will focus the effect of employee attrition, ATI’s ability to keep its therapists and management’s skill at forecasting future results, the agency said.

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