S&P cuts HMSC to B, rates loan B

Standard & Poor's said it lowered its counterparty credit rating on HMSC Corp. to B from B+ as a result of the company's $415 million refinancing. S&P also said it assigned its B senior secured debt rating to HMSC's $305 million senior credit facility, which consists of a $285 million first-lien term loan and a $20 million revolving credit line, along with a CCC+ subordinated debt rating to the company's $110 million second-lien term loan.

The outlook is stable.

The downgrade is in response to a refinancing that significantly increased HMSC's debt leverage on a pro forma basis, to 89.3% as of year-end 2006 from 64.5% under the prior structure, the agency said. More importantly, HMSC's adjusted EBITDA interest coverage materially decreased as a result of the refinancing to 1.9x pro forma as of year-end 2006 compared with 2.6x under the old structure, S&P said.

The new debt-leverage and interest-coverage metrics have substantially deteriorated, the agency said, weakening the company's financial position and falling short of our prior expectations.

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