S&P cuts Community, rates CHS notes B-

S&P said it lowered its ratings for Community Health Systems Inc. to SD, selective default, from CCC+ and subsidiary CHS/Community Health Systems Inc.’s $1.44 billion of 6 1/8% callable junior-priority notes due 2030, $750 million of junior-priority notes due 2029 and $900 million of 6% notes due 2029 to D. The agency also assigned B- issue-level and 2 recovery ratings to the company's senior secured first-lien notes due 2032. The 2 recovery rating indicates substantial (70%-90%; rounded estimate: 70%) recovery in default.

Community Health bought back about $256 million of its senior-priority secured notes due 2029 and $147 million of its junior-priority secured notes maturing in 2029 and 2030, for $305 million

“The downgrade reflects our view that Community Health's latest below-par debt repurchases constitute a selective default under our criteria, given the company's heavy debt load and negative free cash flow and our belief the investors received less value than they were promised under the original securities. This is the fifth time since 2018 that we have lowered issuer credit rating on the company to SD,” S&P said in a press release.

Community Health will use the proceeds to refinance a portion of its senior secured first-lien notes due 2026.

S&P said it plans to raise the SD rating to CCC+ over the next few business days.

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