Moody's downgrades MMM

Moody's Investors Service said it downgraded MMM Holdings, Inc.'s corporate family rating to B3 from B1 and the senior secured debt ratings of MMM, NAMM Holdings, Inc. and Preferred Health Management Corp. to B3 from B1 and placed the ratings under review for further possible downgrade.

The downgrade followed the announcement by the parent company, Aveta Inc. of a significant decline in profitability during the fourth quarter of 2006 and that it may fail to meet one or more of the financial covenants of its bank loan agreement for fiscal year 2006. MMM, NAMM, and Preferred Health are co-borrowers under Aveta's bank credit facility, the agency noted.

The shortfall in earnings is primarily the result of higher medical utilization in the company's Puerto Rico operations, which provides only Medicare Advantage products, Moody's said. MMM Healthcare and Preferred Medical Choice, Inc., two main operating subsidiaries of MMM, are the two largest providers of Medicare Advantage products in Puerto Rico, and the two companies service more than 60% of the Medicare Advantage enrolled population in Puerto Rico and account for about 80% of Aveta's operating earnings.

The agency said its review will focus on the liquidity of MMM, the explanation by the company of the reasons for the unfavorable results and the development of a comprehensive action plan to improve earnings in 2007.

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