Moody's boosts HealthSouth

Moody's Investors Service said it upgraded the corporate family and probability-of-default ratings of HealthSouth Corp. to B2 from B3 and changed the outlook to stable from positive.

The Ba3 rating (LGD2, 24%) on the company's senior secured credit facility and the Caa1 rating (LGD5, 80% from 78%) on its senior unsecured notes were affirmed as was its SGL-2 rating.

The upgrade reflects the company's continued progress in credit metric improvement through both debt reduction and earnings growth, according to the agency.

Operating performance has benefited from HealthSouth's greater than expected volume growth over the past several quarters, which helped to mitigate pricing pressures caused by a roll back and subsequent freeze of Medicare reimbursement rates, the agency noted.

The rating is constrained by the expectation that the company will continue to operate with a considerable amount of financial leverage, Moody's said. The high concentration of revenue from government payers also remains a concern.

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