S&P cuts MSC outlook to negative

Standard & Poor's said it revised its outlook on MSC - Medical Services Co., the operating subsidiary of holding company MCP-MSC Acquisitions Inc., to negative from stable.

The company's ratings were affirmed, including the B corporate credit rating and B- secured second-lien bank loan rating with a recovery rating of 3.

S&P said the outlook revision reflects weaker-than-expected operating performance through the first half of 2005, a recent delay in MSC's filing of its third-quarter fiscal 2005 10-Q while it completes an evaluation of the adequacy of its allowance for doubtful accounts reserve and concerns regarding the company's ability to maintain current base business, as well as its growth prospects.

The ratings continue to reflect MSC's below-anticipated operating performance, narrow operating focus, potential competition for its pharmacy benefits manager business, the relatively low barriers to entry for its services, its reliance on its large workers' compensation insurance clients, potential pricing pressure and its significant debt burden, the agency said.

S&P said these concerns are only partially mitigated by MSC's near-leading position in its industry and the trend by insurance carriers and others to outsource the company's services.

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